MAC2601 May/Jun 2013 exam paper — questions

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  1. Question 1.1 · Accounting for material, labour and overheads; inventory valuation · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. Shanduka Ltd, a company based in Sandton, recorded the following purchases and issues of a material called 'Gold' during December 2012: on 1 December the opening inventory was 300 units at R6,50 each; on 3 December a purchase of 350 units at R6,90 each was made; and on 7 December 400 units were issued to production. You are also told that, for the industry as a whole, total freight charges relating to orders placed in December amounted to R294, and that Shanduka's massive market share means it accounts for 50% of this industry total. Using the FIFO method of inventory valuation, what is the value of the inventory remaining on 7 December, immediately after the issue of 400 units of Gold to production?Show the full question

  2. Question 1.2 · Accounting for material, labour and overheads; inventory valuation · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. While studying in the library for your MAC2601 exam, a fellow student asks you to confirm whether the following four statements about inventory valuation are correct: (i) issuing materials at weighted average cost assumes that each batch taken from the storeroom is made up of the same quantities from each consignment in inventory at the date of issue; (ii) the flow of materials dictates the flow of costs when the FIFO method is used; (iii) during times of inflation, using the FIFO method will result in issues to production being made at 'cheaper' prices; and (iv) the weighted average method divides the total cost of all materials of a particular class by the number of units on hand for that class in order to find the average price. Which combination of these statements is true?Show the full question

  3. Question 1.3 · Direct and absorption costing · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. Under the absorption costing method, product cost is equal to which of the following?Show the full question

  4. Question 1.4 · Direct and absorption costing · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. For the month ended 30 April 2013, the following information is available: opening inventory was 10 000 units and closing inventory was 8 000 units; net profit before tax calculated using absorption costing was R280 000,00; the fixed cost per unit included in opening inventory was R7,50; and the fixed cost per unit included in closing inventory was R9,00. If direct (variable) costing were used instead of absorption costing, what would happen to the net profit before tax for the month ended 30 April 2013?Show the full question

  5. Question 1.5 · Activity-based costing · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. Mangaung Ltd is a Chinese conglomerate that recently opened an office in Johannesburg. Its CEO, Frelimo Mudau, has confided in you that he finds activity-based costing (ABC) difficult to understand, and has asked you, as a management accounting student, to explain the advantages and disadvantages of ABC. Consider the following statements: (i) performance measurement can be carried out in more detail owing to the extensive research required to implement ABC; (ii) ABC is less expensive than the traditional costing method; (iii) ABC may result in more accurate pricing decisions if costs are used to set prices; and (iv) if overhead cost is a low percentage of total cost, ABC will differ significantly from traditional costing. Which combination of these statements is true?Show the full question

  6. Question 1.6 · Activity-based costing · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. You have been given the following statements about activity-based costing (ABC): (i) ABC is more suitable for companies with larger amounts of indirect costs; (ii) the overhead rate will be the same regardless of whether ABC or traditional costing is used; (iii) under ABC, only manufacturing cost can be assigned to products; and (iv) the business process can be redesigned if inadequacies are identified during ABC research. Which combination of these statements is true?Show the full question

  7. Question 1.7 · Process and joint product costing · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. Chachingo Ltd manufactures three joint products (Aye, Bee and Cee) and one by-product (Dee) in a single process. For March 2013, actual production at 100% capacity was 20 000 units of Aye, 25 000 units of Bee, 10 000 units of Cee, and 2 000 units of Dee. All three joint products can be processed further into superior versions called Super Aye, Super Bee and Super Cee; however, because of strict quality control at the end of the process, further processing after split-off results in a rejection of 10% of the final product. If products are processed further, Super Aye sells for R20 per unit with additional processing costs of R4 per unit, Super Bee sells for R15 per unit with additional processing costs of R4 per unit, and Super Cee sells for R25 per unit with additional processing costs of R5 per unit. Costs incurred in the joint process were: direct material R238 500, direct labour R143 100, and manufacturing overheads R95 400. The by-product Dee is sold for R3 per unit. Assuming a regular market exists for the by-product, what is the total amount of joint costs to be allocated among the joint products?Show the full question

  8. Question 1.8 · Process and joint product costing · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. Using the same information about Chachingo Ltd's joint products Aye, Bee and Cee and by-product Dee for March 2013 (production of 20 000, 25 000, 10 000 and 2 000 units respectively at 100% capacity; joint costs of R238 500 direct material, R143 100 direct labour and R95 400 manufacturing overheads; by-product Dee sold at R3 per unit; and, if processed further, Super Aye selling at R20 with R4 additional processing cost per unit, Super Bee selling at R15 with R4 additional processing cost per unit, and Super Cee selling at R25 with R5 additional processing cost per unit, subject to a 10% rejection rate on further processing), what profit is attributed to product Super Bee if the total production is sold and the company uses the physical standard (units) method to allocate joint costs? Round your answer off to the nearest rand.Show the full question

  9. Question 1.9 · Budgeting · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. You have been appointed as a trainee management accountant at one of the investment banks in Sandton. The head of finance has asked you to prepare a document on budgeting, listing its advantages and disadvantages. You are considering the following statements: (i) budget variances can expose weak points in an organisation; (ii) forecasts are always 100% accurate; (iii) budgets do not help with cost control; and (iv) budgets serve as a roadmap in terms of whether the organisation is achieving its goals. Which combination of these statements is true?Show the full question

  10. Question 1.10 · Budgeting · 2 marks

    Question 1 is a multiple-choice question section made up of ten individual questions, numbered 1.1 to 1.10, each worth 2 marks. For each one you must write down the question number together with the letter (A, B, C or D) of the option you believe is correct. While preparing for your MAC2601 exam, you overhear fellow students discussing flexible (flexed) budgets. They make the following statements: (i) a flexible budget is the approved plan of action for achieving a predetermined goal; (ii) a flexible budget is the budget that calculates budgeted income and budgeted costs according to actual production volume; (iii) preparing a flexible budget requires calculating the fixed cost per unit based on actual production volume; and (iv) a flexible budget restates the position if a variation from the expected sales and production volume occurs, on which the fixed budget was originally based. Which combination of these statements is true?Show the full question

  11. Question 2(a) · Standard costing and variance analysis · 2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. For Zanral Ltd, using the standard and actual figures given for direct labour (standard: 20 hours at R8 per hour; actual: 25 hours at R12 per hour, for 500 etags manufactured and sold), calculate the labour rate variance.Show the full question

  12. Question 2(b) · Standard costing and variance analysis · 2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. Using the same standard and actual labour information for Zanral Ltd (standard 20 hours at R8 per hour; actual 25 hours at R12 per hour, for 500 etags), calculate the labour efficiency variance.Show the full question

  13. Question 2(c) · Standard costing and variance analysis · 2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. For Zanral Ltd, calculate the variable manufacturing overhead efficiency variance for the overheads that vary with hours worked, given the standard of 20 hours at R4 per hour and the actual labour hours of 25 hours per etag for the 500 etags manufactured and sold.Show the full question

  14. Question 2(d) · Standard costing and variance analysis · 2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. For Zanral Ltd, using the standard cost of direct material steel (15 kg at R16 per kg) and the actual cost data for steel (10 kg at R12 per kg, totalling R60 000 for the 500 etags manufactured and sold), calculate the purchase price variance for direct material steel.Show the full question

  15. Question 2(e) · Standard costing and variance analysis · 2 marks

    Zanral Ltd, based in Midrand, was awarded a contract by the National Department of Transport to manufacture etags for fitting in cars. The company uses a standard costing system. The standard cost per Zanral etag is made up as follows: direct material – plastic, 10 kg at R10 per kg = R100; direct material – steel, 15 kg at R16 per kg = R240; direct labour, 20 hours at R8 per hour = R160; variable manufacturing overhead that varies with hours worked, 20 hours at R4 per hour = R80; variable selling costs of R22 000; and a budgeted selling price per etag of R1 200. For the year ended 31 December 2012 the actual financial information shows: cost of direct material plastic (12 kg at R13 per kg) totalling R78 000; cost of direct material steel (10 kg at R12 per kg) totalling R60 000; cost of direct labour (25 hours at R12 per hour) totalling R150 000; variable selling costs of R25 000; an actual selling price per etag of R1 350; and 500 etags manufactured and sold during the year. All variances must be rounded off to the nearest rand. Assess whether the following statement about standard costing at Zanral Ltd is true or false: organisations use standard costing because actual performance can be controlled by measuring it against the standard, any variances can then be investigated, and corrective action taken.Show the full question

  16. Question 3(a) · Relevant costing for short-term decisions · 8 marks

    Greyton Glass (Pty) Ltd manufactures and sells two different glass products, namely vases and cutting boards. The management accountant has begun preparing the budget for the 2014 financial year and has identified labour hours as the only limiting factor in the production process. To meet full regular demand, 1 500 labour hours would be required for vases and 1 000 labour hours for cutting boards, giving a total requirement of 2 500 hours; however, only 1 600 labour hours are available in total, resulting in a shortfall of 900 hours. The company cannot obtain any additional labour, but the available labour hours can be reassigned between the two products as needed. Additional information: (1) budgeted fixed costs for the year amount to R480 000; (2) vases are expected to sell for R30 per unit and cutting boards for R25 per unit; (3) expected regular demand for 2014 is 3 000 vases and 4 000 cutting boards; (4) budgeted variable costs per unit are as follows: for vases, variable manufacturing costs of R8 and variable selling costs of R3, giving total variable costs of R11; for cutting boards, variable manufacturing costs of R12 and variable selling costs of R1, giving total variable costs of R13. Using the information given about Greyton Glass (Pty) Ltd's labour hour limitation, selling prices, variable costs and expected demand, determine the sales mix (that is, the number of sales units of vases and the number of sales units of cutting boards) that should be budgeted for the coming 2014 financial year in order to maximise Greyton Glass (Pty) Ltd's budgeted profit.Show the full question

  17. Question 3(b) · Relevant costing for short-term decisions · 2 marks

    Greyton Glass (Pty) Ltd manufactures and sells two different glass products, namely vases and cutting boards. The management accountant has begun preparing the budget for the 2014 financial year and has identified labour hours as the only limiting factor in the production process. To meet full regular demand, 1 500 labour hours would be required for vases and 1 000 labour hours for cutting boards, giving a total requirement of 2 500 hours; however, only 1 600 labour hours are available in total, resulting in a shortfall of 900 hours. The company cannot obtain any additional labour, but the available labour hours can be reassigned between the two products as needed. Additional information: (1) budgeted fixed costs for the year amount to R480 000; (2) vases are expected to sell for R30 per unit and cutting boards for R25 per unit; (3) expected regular demand for 2014 is 3 000 vases and 4 000 cutting boards; (4) budgeted variable costs per unit are as follows: for vases, variable manufacturing costs of R8 and variable selling costs of R3, giving total variable costs of R11; for cutting boards, variable manufacturing costs of R12 and variable selling costs of R1, giving total variable costs of R13. Suppose a potential once-off customer asks Greyton Glass (Pty) Ltd to quote a total price for a special order of 200 vases. With regard to setting a selling price for these 200 vases, one of the following four statements is incorrect; simply write down the number of the incorrect statement: (i) the budgeted fixed costs for the year of R480 000 are irrelevant to the pricing decision; (ii) Greyton Glass (Pty) Ltd will also have to take into account the net opportunity costs associated with giving up its regular sales; (iii) Greyton Glass (Pty) Ltd should also consider qualitative factors before making a final decision about the price to be quoted; (iv) if Greyton Glass (Pty) Ltd sets the special order selling price at an amount lower than the minimum price that can be charged for the special order, this will put the company in a better overall cash position.Show the full question

  18. Question 4(a) · Sensitivity analysis, probabilities and decision trees · 3 marks

    You are working as a business advisor and have drawn up a probability distribution table showing all the possible effects on profit of adding a specific new product line to a client's existing business. The outcome values (effect on profit) and their associated probabilities are: a decrease of R200 000 with a 10% probability; a decrease of R100 000 with a 20% probability; no change (R0) with a 20% probability; an increase of R100 000 with a 35% probability; and an increase of R200 000 with a 15% probability. If the new product line is not added, the client's overall profit would be R2 000 000. Using the probability distribution table described above, calculate the expected value of the effect on the client's profit if the new product line is added.Show the full question

  19. Question 4(b) · Sensitivity analysis, probabilities and decision trees · 1 marks

    You are working as a business advisor and have drawn up a probability distribution table showing all the possible effects on profit of adding a specific new product line to a client's existing business. The outcome values (effect on profit) and their associated probabilities are: a decrease of R200 000 with a 10% probability; a decrease of R100 000 with a 20% probability; no change (R0) with a 20% probability; an increase of R100 000 with a 35% probability; and an increase of R200 000 with a 15% probability. If the new product line is not added, the client's overall profit would be R2 000 000. Based on the same probability distribution table, determine which individual outcome (effect on profit) is most likely to occur.Show the full question

  20. Question 4(c) · Sensitivity analysis, probabilities and decision trees · 2 marks

    You are working as a business advisor and have drawn up a probability distribution table showing all the possible effects on profit of adding a specific new product line to a client's existing business. The outcome values (effect on profit) and their associated probabilities are: a decrease of R200 000 with a 10% probability; a decrease of R100 000 with a 20% probability; no change (R0) with a 20% probability; an increase of R100 000 with a 35% probability; and an increase of R200 000 with a 15% probability. If the new product line is not added, the client's overall profit would be R2 000 000. Calculate the relative decrease in the client's overall profit (which would otherwise be R2 000 000 if the new product line is not added) that would result if the new product line is added and the '-R100 000' outcome (a R100 000 decrease in profit) actually occurs.Show the full question

  21. Question 4(d) · Sensitivity analysis, probabilities and decision trees · 1 marks

    You are working as a business advisor and have drawn up a probability distribution table showing all the possible effects on profit of adding a specific new product line to a client's existing business. The outcome values (effect on profit) and their associated probabilities are: a decrease of R200 000 with a 10% probability; a decrease of R100 000 with a 20% probability; no change (R0) with a 20% probability; an increase of R100 000 with a 35% probability; and an increase of R200 000 with a 15% probability. If the new product line is not added, the client's overall profit would be R2 000 000. State whether the probabilities given in the distribution table would be classified as 'biased' or 'unbiased' if the client's management had to make a lot of assumptions in determining these probabilities. Simply write down either 'Biased' or 'Unbiased', depending on which is correct.Show the full question

  22. Question 4(e)(i) · Sensitivity analysis, probabilities and decision trees · 1 marks

    You are working as a business advisor and have drawn up a probability distribution table showing all the possible effects on profit of adding a specific new product line to a client's existing business. The outcome values (effect on profit) and their associated probabilities are: a decrease of R200 000 with a 10% probability; a decrease of R100 000 with a 20% probability; no change (R0) with a 20% probability; an increase of R100 000 with a 35% probability; and an increase of R200 000 with a 15% probability. If the new product line is not added, the client's overall profit would be R2 000 000. Within the context of decision trees, write down the correct term for the following definition: something that takes place independent of management's actions, i.e. a circumstance that management cannot control.Show the full question

  23. Question 4(e)(ii) · Sensitivity analysis, probabilities and decision trees · 1 marks

    You are working as a business advisor and have drawn up a probability distribution table showing all the possible effects on profit of adding a specific new product line to a client's existing business. The outcome values (effect on profit) and their associated probabilities are: a decrease of R200 000 with a 10% probability; a decrease of R100 000 with a 20% probability; no change (R0) with a 20% probability; an increase of R100 000 with a 35% probability; and an increase of R200 000 with a 15% probability. If the new product line is not added, the client's overall profit would be R2 000 000. Within the context of decision trees, write down the correct term for the following definition: a component of a decision tree which connects one node to the following node and which is represented by a solid line.Show the full question

  24. Question 4(e)(iii) · Sensitivity analysis, probabilities and decision trees · 1 marks

    You are working as a business advisor and have drawn up a probability distribution table showing all the possible effects on profit of adding a specific new product line to a client's existing business. The outcome values (effect on profit) and their associated probabilities are: a decrease of R200 000 with a 10% probability; a decrease of R100 000 with a 20% probability; no change (R0) with a 20% probability; an increase of R100 000 with a 35% probability; and an increase of R200 000 with a 15% probability. If the new product line is not added, the client's overall profit would be R2 000 000. Within the context of decision trees, write down the correct term for the following definition: the final result or outcome of all the events and decisions that lead to a specific point, before weighting with probabilities - also called a 'possible outcome'.Show the full question

  25. Question 5.1a · Nature and behaviour of costs; cost estimation · 3 marks

    This question is made up of two independent parts, Part A and Part B, each dealing with the nature and behaviour of costs. Ebhayi Transport Services runs a fleet of delivery trucks within the Port Elizabeth metropolitan area. The company's cost accountant established that when a truck covers 145 000 km in a year, the average semi-variable operating cost works out to R15,50 per km, whereas if only 98 000 km are covered in a year, the average semi-variable operating cost rises to R19,50 per km. Apply the high-low method to work out the variable cost per kilometre, rounded to two decimal places, as well as the total fixed costs, rounded to the nearest hundred rand.Show the full question

  26. Question 5.1b · Nature and behaviour of costs; cost estimation · 1 marks

    This question is made up of two independent parts, Part A and Part B, each dealing with the nature and behaviour of costs. Using the same Ebhayi Transport Services data (145 000 km at an average semi-variable cost of R15,50 per km, and 98 000 km at R19,50 per km), formulate a linear equation that explains and predicts the cost behaviour of the semi-variable operating costs.Show the full question

  27. Question 5.1c · Nature and behaviour of costs; cost estimation · 1 marks

    This question is made up of two independent parts, Part A and Part B, each dealing with the nature and behaviour of costs. Based on the linear cost equation derived for Ebhayi Transport Services, forecast the total operating costs if a truck is estimated to travel 115 000 km during a year.Show the full question

  28. Question 5.2a · Nature and behaviour of costs; cost estimation · 2 marks

    This question is made up of two independent parts, Part A and Part B, each dealing with the nature and behaviour of costs. MUSIKA (Pty) Ltd is a small entertainment company operating from downtown Johannesburg. It sells a single product, the BIN10 music player. For the year ended 31 March 2013, during which 16 000 units were manufactured and sold, the following figures apply: total sales of R560 000 (R35,00 per unit), total direct material cost of R148 000 (R9,25 per unit), total direct labour cost of R120 000 (R7,50 per unit), total conversion costs of R215 000, and fixed manufacturing overheads of R55 000. There was no inventory on hand at the start or end of the year, and variable manufacturing overheads are based on production. Calculate the total variable manufacturing overheads for the year.Show the full question

  29. Question 5.2b · Nature and behaviour of costs; cost estimation · 2 marks

    This question is made up of two independent parts, Part A and Part B, each dealing with the nature and behaviour of costs. Using the same MUSIKA (Pty) Ltd figures for the year ended 31 March 2013 (16 000 BIN10 units manufactured and sold, sales of R560 000, direct material R148 000, direct labour R120 000, conversion costs R215 000, fixed manufacturing overheads R55 000), calculate the total contribution and the contribution ratio, rounding your workings to two decimal places.Show the full question

  30. Question 5.2c · Nature and behaviour of costs; cost estimation · 3 marks

    This question is made up of two independent parts, Part A and Part B, each dealing with the nature and behaviour of costs. Still using the MUSIKA (Pty) Ltd cost and sales data given for the year ended 31 March 2013, prepare a contribution-format statement of comprehensive income assuming that 20 000 BIN10 units are manufactured and sold instead of 16 000.Show the full question

  31. Question 5.2d · Nature and behaviour of costs; cost estimation · 3 marks

    This question is made up of two independent parts, Part A and Part B, each dealing with the nature and behaviour of costs. Using the same assumptions as in the previous part (20 000 BIN10 units manufactured and sold), calculate the net profit for MUSIKA (Pty) Ltd if the selling price is increased by R5 per unit, total fixed costs increase by R5 000, and the sales volume decreases by 10%.Show the full question

  32. Question 6(a) · Accounting for material, labour and overheads; inventory valuation · 5 marks

    Gidima Ltd, a company based in Centurion, was recently awarded a contract by the national Department of Home Affairs to supply smart ID cards to replace the current version of identity books used in South Africa. The company is excited about the prospects of earning substantial profits from this contract, as suggested by recent South African census population figures. Gidima Ltd has asked you to help compute the budgeted cost of each smart ID card as well as the budgeted profit, and the company applies the absorption costing method of inventory valuation. The budgeted cost of a smart ID card is built up as follows: direct materials consist of specialised plastic at 2,5 metres per card costing R3,50 per metre; direct labour requires 2 hours per card; the variable manufacturing overhead recovery rate is R1,50 per hour; the selling price per smart ID card is R125; and variable selling costs equal 5% of the selling price per card and vary with the number of units sold. Additional information: variable manufacturing overheads vary with labour hours worked; total budgeted fixed manufacturing overheads for the period amount to R550 000 and are recovered based on direct labour hours, with the plant's average long-run capacity being 20 000 ID cards per annum; direct labour is budgeted at R8 per hour; and there was no budgeted opening or closing inventory for the period. Using the information given for Gidima Ltd, calculate the budgeted manufacturing cost of one smart ID card, rounding your answer to two decimal places.Show the full question

  33. Question 6(b) · Accounting for material, labour and overheads; inventory valuation · 5 marks

    Gidima Ltd, a company based in Centurion, was recently awarded a contract by the national Department of Home Affairs to supply smart ID cards to replace the current version of identity books used in South Africa. The company is excited about the prospects of earning substantial profits from this contract, as suggested by recent South African census population figures. Gidima Ltd has asked you to help compute the budgeted cost of each smart ID card as well as the budgeted profit, and the company applies the absorption costing method of inventory valuation. The budgeted cost of a smart ID card is built up as follows: direct materials consist of specialised plastic at 2,5 metres per card costing R3,50 per metre; direct labour requires 2 hours per card; the variable manufacturing overhead recovery rate is R1,50 per hour; the selling price per smart ID card is R125; and variable selling costs equal 5% of the selling price per card and vary with the number of units sold. Additional information: variable manufacturing overheads vary with labour hours worked; total budgeted fixed manufacturing overheads for the period amount to R550 000 and are recovered based on direct labour hours, with the plant's average long-run capacity being 20 000 ID cards per annum; direct labour is budgeted at R8 per hour; and there was no budgeted opening or closing inventory for the period. Using the information given for Gidima Ltd, calculate the total budgeted profit if the company manufactures and supplies 9 000 smart ID cards to the Department of Home Affairs.Show the full question

  34. Question 7.1 · Job costing · 2 marks

    Mboni Tshivhasa makes clay pots that she sells mainly to foreign tourists at the Punda Maria Gate of the Kruger National Park. The pots are painted with enamel paint after being fired in an open straw fire, and every job is given a unique African name to identify it. Mboni has asked you, as her management accountant, to determine the cost of each job using a job costing system. The following balances were extracted from her books on 1 April 2013: direct material R90 000; bank R3 200; sales expenses R3 600. During April 2013 the following costs were allocated to jobs: Job Khali - material R25 200, wages R16 800; Job Mvuvhelo - material R32 400, wages R20 160; Job Lusiko - material R18 700, wages R9 360; Job Mutondo - material R2 900, wages nil. Additional information: (1) actual manufacturing overhead costs incurred during the month were R72 600; (2) a mark-up of 50% is added to the total cost of each job to arrive at its selling price; (3) overheads are applied to production at a rate of 90% of direct material costs; (4) Jobs Khali, Mvuvhelo and Lusiko were completed and transferred to the finished goods account; (5) Jobs Khali and Lusiko were sold on 30 April 2013. Using the information given about Mboni Tshivhasa's job costing records for April 2013, prepare the Direct material control general ledger account, properly balanced.Show the full question

  35. Question 7.2 · Job costing · 2 marks

    Mboni Tshivhasa makes clay pots that she sells mainly to foreign tourists at the Punda Maria Gate of the Kruger National Park. The pots are painted with enamel paint after being fired in an open straw fire, and every job is given a unique African name to identify it. Mboni has asked you, as her management accountant, to determine the cost of each job using a job costing system. The following balances were extracted from her books on 1 April 2013: direct material R90 000; bank R3 200; sales expenses R3 600. During April 2013 the following costs were allocated to jobs: Job Khali - material R25 200, wages R16 800; Job Mvuvhelo - material R32 400, wages R20 160; Job Lusiko - material R18 700, wages R9 360; Job Mutondo - material R2 900, wages nil. Additional information: (1) actual manufacturing overhead costs incurred during the month were R72 600; (2) a mark-up of 50% is added to the total cost of each job to arrive at its selling price; (3) overheads are applied to production at a rate of 90% of direct material costs; (4) Jobs Khali, Mvuvhelo and Lusiko were completed and transferred to the finished goods account; (5) Jobs Khali and Lusiko were sold on 30 April 2013. Using the information given about Mboni Tshivhasa's job costing records for April 2013, prepare the Manufacturing overhead control general ledger account, properly balanced.Show the full question

  36. Question 7.3 · Job costing · 3 marks

    Mboni Tshivhasa makes clay pots that she sells mainly to foreign tourists at the Punda Maria Gate of the Kruger National Park. The pots are painted with enamel paint after being fired in an open straw fire, and every job is given a unique African name to identify it. Mboni has asked you, as her management accountant, to determine the cost of each job using a job costing system. The following balances were extracted from her books on 1 April 2013: direct material R90 000; bank R3 200; sales expenses R3 600. During April 2013 the following costs were allocated to jobs: Job Khali - material R25 200, wages R16 800; Job Mvuvhelo - material R32 400, wages R20 160; Job Lusiko - material R18 700, wages R9 360; Job Mutondo - material R2 900, wages nil. Additional information: (1) actual manufacturing overhead costs incurred during the month were R72 600; (2) a mark-up of 50% is added to the total cost of each job to arrive at its selling price; (3) overheads are applied to production at a rate of 90% of direct material costs; (4) Jobs Khali, Mvuvhelo and Lusiko were completed and transferred to the finished goods account; (5) Jobs Khali and Lusiko were sold on 30 April 2013. Using the information given about Mboni Tshivhasa's job costing records for April 2013, prepare the Work-in-process control general ledger account, properly balanced.Show the full question

  37. Question 7.4 · Job costing · 1 marks

    Mboni Tshivhasa makes clay pots that she sells mainly to foreign tourists at the Punda Maria Gate of the Kruger National Park. The pots are painted with enamel paint after being fired in an open straw fire, and every job is given a unique African name to identify it. Mboni has asked you, as her management accountant, to determine the cost of each job using a job costing system. The following balances were extracted from her books on 1 April 2013: direct material R90 000; bank R3 200; sales expenses R3 600. During April 2013 the following costs were allocated to jobs: Job Khali - material R25 200, wages R16 800; Job Mvuvhelo - material R32 400, wages R20 160; Job Lusiko - material R18 700, wages R9 360; Job Mutondo - material R2 900, wages nil. Additional information: (1) actual manufacturing overhead costs incurred during the month were R72 600; (2) a mark-up of 50% is added to the total cost of each job to arrive at its selling price; (3) overheads are applied to production at a rate of 90% of direct material costs; (4) Jobs Khali, Mvuvhelo and Lusiko were completed and transferred to the finished goods account; (5) Jobs Khali and Lusiko were sold on 30 April 2013. Using the information given about Mboni Tshivhasa's job costing records for April 2013, prepare the Finished goods general ledger account, properly balanced.Show the full question

  38. Question 7.5 · Job costing · 2 marks

    Mboni Tshivhasa makes clay pots that she sells mainly to foreign tourists at the Punda Maria Gate of the Kruger National Park. The pots are painted with enamel paint after being fired in an open straw fire, and every job is given a unique African name to identify it. Mboni has asked you, as her management accountant, to determine the cost of each job using a job costing system. The following balances were extracted from her books on 1 April 2013: direct material R90 000; bank R3 200; sales expenses R3 600. During April 2013 the following costs were allocated to jobs: Job Khali - material R25 200, wages R16 800; Job Mvuvhelo - material R32 400, wages R20 160; Job Lusiko - material R18 700, wages R9 360; Job Mutondo - material R2 900, wages nil. Additional information: (1) actual manufacturing overhead costs incurred during the month were R72 600; (2) a mark-up of 50% is added to the total cost of each job to arrive at its selling price; (3) overheads are applied to production at a rate of 90% of direct material costs; (4) Jobs Khali, Mvuvhelo and Lusiko were completed and transferred to the finished goods account; (5) Jobs Khali and Lusiko were sold on 30 April 2013. Based on the information about Mboni Tshivhasa's job costing records for April 2013, calculate the profit or loss she made for the month of April 2013.Show the full question

  39. Question 8.a · Process and joint product costing · 7 marks

    Bontebo (Pty) Ltd manufactures a single product through one continuous process and applies a process costing system. For March 2013 the following unit data apply: work-in-process on 1 March 2013 stood at 12 000 units and was 60% complete; 38 000 units were started during the month; 35 000 units were completed during the month; and work-in-process on 31 March 2013 amounted to 10 000 units, 20% complete. Additional information: (1) Bontebo (Pty) Ltd uses the FIFO method of inventory valuation; (2) wastage occurs at the point where the process is 30% complete; (3) raw material is introduced at the start of the process while conversion costs are incurred evenly throughout the process; (5) normal loss is estimated at 10% of the units that reach the wastage point; (6) cost data for March 2013 are as follows - opening work-in-process on 1 March 2013 consisted of material of R64 800 and conversion cost of R18 720, while current production costs incurred during the month were material of R209 000 and conversion cost of R118 940. Using the information given for Bontebo (Pty) Ltd for March 2013, prepare the quantity statement for the month, showing the flow of units including opening and closing work-in-process, units started, completed, normal loss and any equivalent units required under the FIFO method.Show the full question

  40. Question 8.b · Process and joint product costing · 3 marks

    Bontebo (Pty) Ltd manufactures a single product through one continuous process and applies a process costing system. For March 2013 the following unit data apply: work-in-process on 1 March 2013 stood at 12 000 units and was 60% complete; 38 000 units were started during the month; 35 000 units were completed during the month; and work-in-process on 31 March 2013 amounted to 10 000 units, 20% complete. Additional information: (1) Bontebo (Pty) Ltd uses the FIFO method of inventory valuation; (2) wastage occurs at the point where the process is 30% complete; (3) raw material is introduced at the start of the process while conversion costs are incurred evenly throughout the process; (5) normal loss is estimated at 10% of the units that reach the wastage point; (6) cost data for March 2013 are as follows - opening work-in-process on 1 March 2013 consisted of material of R64 800 and conversion cost of R18 720, while current production costs incurred during the month were material of R209 000 and conversion cost of R118 940. Based on the same information for Bontebo (Pty) Ltd, prepare the production cost statement for March 2013, showing the cost per equivalent unit for material and conversion and the allocation of total costs.Show the full question

  41. Question 8.c · Process and joint product costing · 1 marks

    Bontebo (Pty) Ltd manufactures a single product through one continuous process and applies a process costing system. For March 2013 the following unit data apply: work-in-process on 1 March 2013 stood at 12 000 units and was 60% complete; 38 000 units were started during the month; 35 000 units were completed during the month; and work-in-process on 31 March 2013 amounted to 10 000 units, 20% complete. Additional information: (1) Bontebo (Pty) Ltd uses the FIFO method of inventory valuation; (2) wastage occurs at the point where the process is 30% complete; (3) raw material is introduced at the start of the process while conversion costs are incurred evenly throughout the process; (5) normal loss is estimated at 10% of the units that reach the wastage point; (6) cost data for March 2013 are as follows - opening work-in-process on 1 March 2013 consisted of material of R64 800 and conversion cost of R18 720, while current production costs incurred during the month were material of R209 000 and conversion cost of R118 940. Calculate the Rand value of the normal loss for Bontebo (Pty) Ltd in terms of material cost only for March 2013, rounding the amount off to the nearest Rand.Show the full question

  42. Question 8.d · Process and joint product costing · 4 marks

    Bontebo (Pty) Ltd manufactures a single product through one continuous process and applies a process costing system. For March 2013 the following unit data apply: work-in-process on 1 March 2013 stood at 12 000 units and was 60% complete; 38 000 units were started during the month; 35 000 units were completed during the month; and work-in-process on 31 March 2013 amounted to 10 000 units, 20% complete. Additional information: (1) Bontebo (Pty) Ltd uses the FIFO method of inventory valuation; (2) wastage occurs at the point where the process is 30% complete; (3) raw material is introduced at the start of the process while conversion costs are incurred evenly throughout the process; (5) normal loss is estimated at 10% of the units that reach the wastage point; (6) cost data for March 2013 are as follows - opening work-in-process on 1 March 2013 consisted of material of R64 800 and conversion cost of R18 720, while current production costs incurred during the month were material of R209 000 and conversion cost of R118 940. Calculate the total Rand value of the closing work-in-process for Bontebo (Pty) Ltd as at 31 March 2013 that will be included in the cost allocation statement.Show the full question

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