BBA (Pty) Ltd constructed a factory plant during the financial year ended 31 December 2021. The plant was completed on 30 June 2021and the following costs were incurred during the financial year. Select the costs that would be included in the calculation of the cost of the factory plant that was constructed. Select the amounts you would include in the cost of plant calculation. RConstruction costs which includes material and labour costs (included in this amount is material amounting to R15 000, that was destroyed in a hail storm)770 000Import duties on certain construction materials - non-refundable30 000Import duties on certain construction materials - refundable10 000Administration costs15 000Engineer fees40 000Fuel costs to transport construction materials to the construction site3 000Advertising cost of the product produced by the new factory plant 20 000Initial operating losses due to insufficient demand for product during the initial months after the plant was brought into use45 000Testing costs incurred to ensure that the plant was fully operational51 000Cost of function held for staff and management to celebrate the opening of the plant25 000Total cost of factory plant? 770 000 770 000 - 15 000 = 755 000 30 000 10 000 15 000 40 000 3 000 20 000 45 000 51 000 20 000

Cost of construction includes some cost or expenses such as direct material, direct labour,…

Answered: mpleted on 30 June 2021 and the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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BBA (Pty) Ltd constructed a factory plant during the financial year ended 31 December 2021. The plant was completed on 30 June 2021

and the following costs were incurred during the financial year.

Select the costs that would be included in the calculation of the cost of the factory plant that was constructed.

Select the amounts you would include in the cost of plant calculation.

	R
Construction costs which includes material and labour costs (included in this amount is material amounting to R15 000, that was destroyed in a hail storm)	770 000
Import duties on certain construction materials - non-refundable	30 000
Import duties on certain construction materials - refundable	10 000
Administration costs	15 000
Engineer fees	40 000
Fuel costs to transport construction materials to the construction site	3 000
Advertising cost of the product produced by the new factory plant	20 000
Initial operating losses due to insufficient demand for product during the initial months after the plant was brought into use	45 000
Testing costs incurred to ensure that the plant was fully operational	51 000
Cost of function held for staff and management to celebrate the opening of the plant	25 000
Total cost of factory plant	?

		770 000
		770 000 - 15 000 = 755 000
		30 000
		10 000
		15 000
		40 000
		3 000
		20 000
		45 000
		51 000
		20 000

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