Alta Ltd is a company that manufactures office furniture. The furniture is assembled in their factory from components purchased from suppliers. Raw materials are determined from the product specif

Alta Ltd is a company that manufactures office furniture. The furniture is assembled

in their factory from components purchased from suppliers. Raw materials are

determined from the product specification, and labour hours are recorded for each

item manufactured. Overheads are allocated to the cost of inventories on the basis

of total direct labour cost.

The draft accounts at the end of December 2018 reflect the following Rand values

for direct material and direct labour costs in inventory:

Raw materials

R

Work-in progress

R

Finished goods

R

Direct materials 229 240 192 622 274 400

Direct labour – 17 510 103 800

The above work-in-progress and finished goods were manufactured in December

2018. The company was operating at normal capacity.

An extract of the trial balance of Alta Ltd for December 2018 included the following

costs:

R

Direct labour 121 310

Selling and distribution costs 120 140

Depreciation 10 250

Factory manager’s salary 25 000

Other production overheads 62 200

Rent expense 13 000

Administrative overheads 74 400

Accounting and secretarial fees 17 300

Required

4.1 Calculate the production overhead rate for December 2018. Round off

the rate to two decimal places. (9)

4.2 Calculate the value of overheads to be allocated to the cost of

inventories of Alta Ltd for December 2018.