1. **Problem Statement:** Prepare the Actual Statement of Comprehensive Income for Good-Quality-Wardrobes for the year ended 31 December 2024 using direct costing principles, calculate over/under recovered fixed manufacturing overheads, prepare the journal entry, and differentiate costing systems. 2. **Calculate Raw Material Cost per Wardrobe:** Melamine Board cost per wardrobe = R3750 Box of nails and handles = R200 Varnish Paint = R350 Total raw material cost = R3750 + R200 + R350 = R4300 3. **Calculate Labour Cost:** - Employees: 4 employees, 40 hours/week, 52 weeks - 3 weeks leave = 49 weeks - Normal hours per employee = 40 * 49 = 1960 hours - Overtime hours per employee = 10 - Normal labour rate = R16/hour - Overtime labour rate = 2 * 16 = R32/hour - Labour cost per employee = (1960 * 16) + (10 * 32) = 31360 + 320 = R31680 - Total labour for 4 employees = 4 * 31680 = R126720 - Supervisor: 1 supervisor, same hours - Normal hours = 1960, overtime = 10 - Supervisor rate = R21/hour, overtime = 2 * 21 = R42/hour - Supervisor labour cost = (1960 * 21) + (10 * 42) = 41160 + 420 = R41580 - Total labour cost = 126720 + 41580 = R168300 - Labour cost per wardrobe = R168300 / 195 wardrobes = R862.05 4. **Manufacturing Overheads:** - Variable electricity cost per wardrobe = R200 - Fixed depreciation per month = R5000 - Annual depreciation = 5000 * 12 = R60000 - Fixed overhead per wardrobe = R60000 / 195 = R307.69 5. **Calculate Variable Manufacturing Cost per Wardrobe:** = Raw material + Labour + Variable overhead = 4300 + 862.05 + 200 = R5362.05 6. **Calculate Contribution Margin:** Selling price per wardrobe = R8500 Variable cost per wardrobe = R5362.05 Contribution margin per wardrobe = 8500 - 5362.05 = R3137.95 7. **Calculate Total Contribution Margin:** Wardrobes sold = 200 Total contribution margin = 200 * 3137.95 = R627590 8. **Calculate Fixed Costs:** - Fixed manufacturing overhead = R60000 - Administrative expenses = R3000 per month, 40% variable Variable admin = 0.4 * 3000 = 1200 per month Fixed admin = 3000 - 1200 = 1800 per month Annual fixed admin = 1800 * 12 = R21600 - Advertising expenses = R1000 per month, 50% variable Variable advertising = 0.5 * 1000 = 500 per month Fixed advertising = 1000 - 500 = 500 per month Annual fixed advertising = 500 * 12 = R6000 - Total fixed costs = 60000 + 21600 + 6000 = R87600 9. **Calculate Variable Expenses:** - Variable admin = 1200 * 12 = R14400 - Variable advertising = 500 * 12 = R6000 - Total variable expenses = 14400 + 6000 = R20400 10. **Calculate Variable Cost of Goods Sold:** - Opening inventory = 10 wardrobes at R60000 total = R6000 per wardrobe - Manufactured = 195 wardrobes - Sold = 200 wardrobes - Closing inventory = 10 + 195 - 200 = 5 wardrobes - Variable cost per wardrobe = R5362.05 - Closing inventory value = 5 * 5362.05 = R26810.25 - Variable cost of goods sold = (10 * 6000) + (195 * 5362.05) - 26810.25 = 60000 + 1045600 - 26810.25 = R1086789.75 11. **Prepare Statement of Comprehensive Income (Direct Costing):** - Sales = 200 * 8500 = R1700000 - Variable cost of goods sold = R1086789.75 - Variable expenses = R20400 - Contribution margin = 1700000 - 1086789.75 - 20400 = R589810.25 - Fixed costs = R87600 - Net profit = 589810.25 - 87600 = R502210.25 12. **(b)(i) Calculate Over/Under Recovered Fixed Manufacturing Overheads:** - Applied fixed overhead = R100000 - Actual fixed overhead = R60000 - Over recovered overhead = 100000 - 60000 = R40000 13. **(b)(ii) Journal Entry for Over Recovered Overhead:** - Debit Manufacturing Overhead R40000 - Credit Cost of Goods Sold R40000 14. **(c) Differentiate Direct Costing and Absorption Costing:** - Direct costing includes only variable manufacturing costs in product cost; fixed manufacturing overhead is treated as a period expense. - Absorption costing includes both variable and fixed manufacturing overheads in product cost. **Final answers:** - Statement of Comprehensive Income net profit = R502210.25 - Over recovered fixed overhead = R40000 - Journal entry: Debit Manufacturing Overhead R40000, Credit Cost of Goods Sold R40000 - Difference: Direct costing treats fixed overhead as period cost; absorption costing includes it in product cost.