MAC2601 May/Jun 2015 exam paper — questions

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  1. Question 1.1(a) · Cost-volume-profit analysis · 3 marks

    Question 1 consists of two independent parts, and both parts must be answered. Unless a sub-question states otherwise, each sub-question is independent of the previous one. Mafikeng Manufacturers (Pty) Ltd manufactures a single product. For the 2016 financial year the company has budgeted the following: a break-even point of 6 000 units, a selling price of R120 per unit and a variable cost of R30 per unit (no opening or closing inventory figures are given). Calculate the budgeted total fixed costs for the 2016 financial year.Show the full question

  2. Question 1.1(b) · Cost-volume-profit analysis · 2 marks

    Question 1 consists of two independent parts, and both parts must be answered. Unless a sub-question states otherwise, each sub-question is independent of the previous one. Using the same budgeted data for Mafikeng Manufacturers (Pty) Ltd (break-even point of 6 000 units, selling price of R120 per unit, variable cost of R30 per unit), calculate the actual contribution in Rand if 7 500 units are actually produced and sold during the 2016 financial year.Show the full question

  3. Question 1.1(c) · Cost-volume-profit analysis · 1 marks

    Question 1 consists of two independent parts, and both parts must be answered. Unless a sub-question states otherwise, each sub-question is independent of the previous one. For Mafikeng Manufacturers (Pty) Ltd, using the same budgeted figures (break-even point of 6 000 units, selling price of R120, variable cost of R30), calculate the margin of safety in units if 8 000 units are actually produced and sold.Show the full question

  4. Question 1.1(d) · Cost-volume-profit analysis · 2 marks

    Question 1 consists of two independent parts, and both parts must be answered. Unless a sub-question states otherwise, each sub-question is independent of the previous one. For Mafikeng Manufacturers (Pty) Ltd, calculate the margin of safety ratio, expressed as a percentage, if 10 000 units are actually produced and sold during the 2016 financial year.Show the full question

  5. Question 1.1(e) · Cost-volume-profit analysis · 3 marks

    Question 1 consists of two independent parts, and both parts must be answered. Unless a sub-question states otherwise, each sub-question is independent of the previous one. For Mafikeng Manufacturers (Pty) Ltd, calculate the number of units that would have to be sold to achieve a target (expected) profit of R90 000 for the 2016 financial year, assuming total fixed costs are those calculated in part (a) above.Show the full question

  6. Question 1.1(f) · Cost-volume-profit analysis · 3 marks

    Question 1 consists of two independent parts, and both parts must be answered. Unless a sub-question states otherwise, each sub-question is independent of the previous one. For Mafikeng Manufacturers (Pty) Ltd, calculate the new break-even point in Rand if the selling price increases by 25% and the total fixed cost for the 2016 financial year now amounts to R600 000.Show the full question

  7. Question 1.2(a) · Cost-volume-profit analysis · 5 marks

    Question 1 consists of two independent parts, and both parts must be answered. Unless a sub-question states otherwise, each sub-question is independent of the previous one. As management accountant of Teamwork Technology Services (Pty) Ltd, you have been given the following estimates for the 2016 financial year: possible outcome 1 has a contribution of R100 000 with a 30% probability; outcome 2 has a contribution of R120 000 with a 20% probability; outcome 3 has a contribution of R220 000 with a 15% probability; outcome 4 has a contribution of R350 000 with a 10% probability; and outcome 5 has a contribution of R60 000 with an unstated probability. There are no other possible outcomes for this scenario. Calculate the expected value of contribution for the 2016 financial year.Show the full question

  8. Question 1.2(b) · Cost-volume-profit analysis · 1 marks

    Question 1 consists of two independent parts, and both parts must be answered. Unless a sub-question states otherwise, each sub-question is independent of the previous one. Using the same five possible outcomes for Teamwork Technology Services (Pty) Ltd (contributions of R100 000 at 30% probability, R120 000 at 20%, R220 000 at 15%, R350 000 at 10%, and R60 000 at the remaining probability, with no other possible outcomes), determine which contribution value is most likely to occur in the 2016 financial year.Show the full question

  9. Question 2.a · Process and joint product costing · 6 marks

    Process Perfect Limited manufactures a single product and uses a process costing system. For the month of April 2015 the company recorded the following: opening work in progress ("opening WIP") as at 1 April, which was 55% complete, amounted to 18 000 units; closing work in progress ("closing WIP") as at 30 April, which was 70% complete, amounted to 20 000 units; new units put into production during April 2015 totalled 80 000 units; and units completed during April 2015 totalled 70 000 units. Additional information: normal losses are estimated at 3% of the units that reach/pass the wastage point; normal losses occur when the process is 60% complete; raw materials are added at the start of the process while conversion costs are incurred evenly throughout the process. The relevant cost information was: opening WIP raw materials of R144 000 and conversion costs of R49 500; and costs added during April 2015 of R426 400 for raw materials and R235 850 for conversion. For Process Perfect Limited's April 2015 production data described above, prepare the quantity statement for April 2015, applying the weighted average method of inventory valuation.Show the full question

  10. Question 2.b · Process and joint product costing · 3 marks

    Process Perfect Limited manufactures a single product and uses a process costing system. For the month of April 2015 the company recorded the following: opening work in progress ("opening WIP") as at 1 April, which was 55% complete, amounted to 18 000 units; closing work in progress ("closing WIP") as at 30 April, which was 70% complete, amounted to 20 000 units; new units put into production during April 2015 totalled 80 000 units; and units completed during April 2015 totalled 70 000 units. Additional information: normal losses are estimated at 3% of the units that reach/pass the wastage point; normal losses occur when the process is 60% complete; raw materials are added at the start of the process while conversion costs are incurred evenly throughout the process. The relevant cost information was: opening WIP raw materials of R144 000 and conversion costs of R49 500; and costs added during April 2015 of R426 400 for raw materials and R235 850 for conversion. Using the same April 2015 information for Process Perfect Limited, prepare the production cost statement for April 2015, applying the weighted average method of inventory valuation.Show the full question

  11. Question 2.c.i · Process and joint product costing · 1 marks

    Process Perfect Limited manufactures a single product and uses a process costing system. For the month of April 2015 the company recorded the following: opening work in progress ("opening WIP") as at 1 April, which was 55% complete, amounted to 18 000 units; closing work in progress ("closing WIP") as at 30 April, which was 70% complete, amounted to 20 000 units; new units put into production during April 2015 totalled 80 000 units; and units completed during April 2015 totalled 70 000 units. Additional information: normal losses are estimated at 3% of the units that reach/pass the wastage point; normal losses occur when the process is 60% complete; raw materials are added at the start of the process while conversion costs are incurred evenly throughout the process. The relevant cost information was: opening WIP raw materials of R144 000 and conversion costs of R49 500; and costs added during April 2015 of R426 400 for raw materials and R235 850 for conversion. Considering the Process Perfect Limited scenario for April 2015, indicate whether the following statement is true or false: a portion of the rand value of the normal loss will be allocated to closing inventory in the cost allocation statement.Show the full question

  12. Question 2.c.ii · Process and joint product costing · 1 marks

    Process Perfect Limited manufactures a single product and uses a process costing system. For the month of April 2015 the company recorded the following: opening work in progress ("opening WIP") as at 1 April, which was 55% complete, amounted to 18 000 units; closing work in progress ("closing WIP") as at 30 April, which was 70% complete, amounted to 20 000 units; new units put into production during April 2015 totalled 80 000 units; and units completed during April 2015 totalled 70 000 units. Additional information: normal losses are estimated at 3% of the units that reach/pass the wastage point; normal losses occur when the process is 60% complete; raw materials are added at the start of the process while conversion costs are incurred evenly throughout the process. The relevant cost information was: opening WIP raw materials of R144 000 and conversion costs of R49 500; and costs added during April 2015 of R426 400 for raw materials and R235 850 for conversion. Considering the Process Perfect Limited scenario for April 2015, indicate whether the following statement is true or false: abnormal losses will be written off as a period cost and will not be included in the valuation of inventory.Show the full question

  13. Question 2.c.iii · Process and joint product costing · 1 marks

    Process Perfect Limited manufactures a single product and uses a process costing system. For the month of April 2015 the company recorded the following: opening work in progress ("opening WIP") as at 1 April, which was 55% complete, amounted to 18 000 units; closing work in progress ("closing WIP") as at 30 April, which was 70% complete, amounted to 20 000 units; new units put into production during April 2015 totalled 80 000 units; and units completed during April 2015 totalled 70 000 units. Additional information: normal losses are estimated at 3% of the units that reach/pass the wastage point; normal losses occur when the process is 60% complete; raw materials are added at the start of the process while conversion costs are incurred evenly throughout the process. The relevant cost information was: opening WIP raw materials of R144 000 and conversion costs of R49 500; and costs added during April 2015 of R426 400 for raw materials and R235 850 for conversion. Considering the Process Perfect Limited scenario for April 2015, indicate whether the following statement is true or false: abnormal losses are sometimes also referred to as 'controllable losses'.Show the full question

  14. Question 2.d · Process and joint product costing · 8 marks

    Process Perfect Limited manufactures a single product and uses a process costing system. For the month of April 2015 the company recorded the following: opening work in progress ("opening WIP") as at 1 April, which was 55% complete, amounted to 18 000 units; closing work in progress ("closing WIP") as at 30 April, which was 70% complete, amounted to 20 000 units; new units put into production during April 2015 totalled 80 000 units; and units completed during April 2015 totalled 70 000 units. Additional information: normal losses are estimated at 3% of the units that reach/pass the wastage point; normal losses occur when the process is 60% complete; raw materials are added at the start of the process while conversion costs are incurred evenly throughout the process. The relevant cost information was: opening WIP raw materials of R144 000 and conversion costs of R49 500; and costs added during April 2015 of R426 400 for raw materials and R235 850 for conversion. Now assume that, for Process Perfect Limited's April 2015 production, losses occur when the process is 90% complete instead of 60% complete. Prepare the quantity statement for April 2015 based on this revised wastage point, using the first-in-first-out (FIFO) method of inventory valuation.Show the full question

  15. Question 3(a) · Direct and absorption costing · 10 marks

    Phembani (Pty) Ltd manufactures and sells model locomotives to hobby shops. The selling price per model locomotive was R500 in 2015 and is expected to rise by 10% per year from 2016 onwards. There was no opening inventory at the start of 2015. Unit movements were as follows (2015 figures are actual, 2016 figures are budgeted): in 2015, 1 300 units were manufactured and 1 000 units were sold, leaving an unknown closing inventory; in 2016, 1 400 units are budgeted to be manufactured and 1 500 units budgeted to be sold, again with closing inventory to be determined. Rendani van Tonder, the Chief Financial Officer of Phembani, supplied the following cost information; the company's financial year ends on 31 December. Variable cost per unit for 2015 and 2016 respectively: direct material R100,00 and R120,00; direct labour R30,00 and R35,00; variable manufacturing overheads R20,00 and R25,00; variable selling costs R2,00 and R2,50. Total fixed costs for 2015 and 2016 respectively: fixed manufacturing overheads R60 000,00 and R66 000,00; fixed selling costs R94 000,00 and R100 000,00; fixed administrative overheads R46 000,00 and R48 000,00. Phembani (Pty) Ltd applies the weighted average method of inventory valuation. Round all calculations to two decimals throughout. Using the cost and unit information given for Phembani (Pty) Ltd, prepare the budgeted statement of comprehensive income for the year ended 31 December 2016 according to the direct (variable) costing method, applying the weighted average method of inventory valuation and rounding to two decimals throughout your calculations.Show the full question

  16. Question 3(b) · Direct and absorption costing · 10 marks

    Phembani (Pty) Ltd manufactures and sells model locomotives to hobby shops. The selling price per model locomotive was R500 in 2015 and is expected to rise by 10% per year from 2016 onwards. There was no opening inventory at the start of 2015. Unit movements were as follows (2015 figures are actual, 2016 figures are budgeted): in 2015, 1 300 units were manufactured and 1 000 units were sold, leaving an unknown closing inventory; in 2016, 1 400 units are budgeted to be manufactured and 1 500 units budgeted to be sold, again with closing inventory to be determined. Rendani van Tonder, the Chief Financial Officer of Phembani, supplied the following cost information; the company's financial year ends on 31 December. Variable cost per unit for 2015 and 2016 respectively: direct material R100,00 and R120,00; direct labour R30,00 and R35,00; variable manufacturing overheads R20,00 and R25,00; variable selling costs R2,00 and R2,50. Total fixed costs for 2015 and 2016 respectively: fixed manufacturing overheads R60 000,00 and R66 000,00; fixed selling costs R94 000,00 and R100 000,00; fixed administrative overheads R46 000,00 and R48 000,00. Phembani (Pty) Ltd applies the weighted average method of inventory valuation. Round all calculations to two decimals throughout. Using the same cost and unit information for Phembani (Pty) Ltd, prepare the budgeted statement of comprehensive income for the year ended 31 December 2016 according to the absorption costing method, applying the weighted average method of inventory valuation and rounding to two decimals throughout your calculations.Show the full question

  17. Question 4.1 · Relevant costing for short-term decisions · 10 marks

    Question 4 consists of two independent parts, Part 4.1 and Part 4.2, both of which must be answered. Home Decorations (Pty) Ltd manufactures and sells four different home décor products and is currently planning for the 2016 financial year. The company has made the following estimates: for the Clock, demand is 8 000 units, contribution per unit is R100, and required labour hours per unit is 1,2; for the Lamp, demand is 6 000 units, contribution per unit is R400, and required labour hours per unit is 1,0; for the Scatter cushion, demand is 10 000 units, contribution per unit is R150, and required labour hours per unit is 2,0; for the Cake stand, demand is 2 000 units, contribution per unit is R120, and required labour hours per unit is 0,8. All resources are freely available except for labour hours, which are limited to 12 400 for the 2016 financial year. You have already identified labour hours as the limiting factor and calculated the shortage. Calculate the optimal production mix for Home Decorations (Pty) Ltd for the 2016 financial year, rounding to two decimals throughout your calculations.Show the full question

  18. Question 4.2 · Relevant costing for short-term decisions · 10 marks

    Question 4 consists of two independent parts, Part 4.1 and Part 4.2, both of which must be answered. Moodlely Blankets (Pty) Ltd buys and sells blankets. The company's management accountant prepared the following budgeted contribution statement for June 2015: sales of R1 500 000, less variable costs of R890 000 (comprising opening inventory of R125 000, purchases of R950 000, less closing inventory of R210 000, plus variable selling costs of R25 000), giving contribution of R610 000; less fixed costs of R105 000 (comprising production overheads of R35 000 and administration overheads of R70 000), giving a net profit before tax of R505 000. Additional information: the opening bank balance on 1 June 2015 is expected to be R150 000. Cash sales will amount to 60% of total sales for June, increasing to 70% of total sales in July 2015. Of inventory purchased in June, 80% will be on a cash basis, rising to 90% for July purchases; all June credit purchases will only be paid in July or August. The company's total credit purchases in May amounted to R300 000, of which 90% will be settled in June and the remaining balance settled in July. Cash receipts in June relating to credit sales made in May amounted to R200 000. Total depreciation amounts to R10 000 per month and is included in the budgeted fixed costs above. All other expenses in the contribution statement will be incurred on a cash basis. In June 2015, the company is expected to settle a liability of R34 000 in cash. Prepare a cash budget for Moodlely Blankets (Pty) Ltd for June 2015 and calculate the expected closing balance in the bank account as at 30 June 2015, ignoring taxation.Show the full question

  19. Question 5.1 · Process and joint product costing · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Identify in which one of the following situations a management accountant would most likely recommend using a process costing system rather than a job costing system.Show the full question

  20. Question 5.2 · Accounting for material, labour and overheads; inventory valuation · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. For Leaf Extracts Shampoo (Pty) Ltd's 2015 financial year, budgeted overheads were R480 000 while actual overheads were R520 000. Litres produced were budgeted at 14 000 for Jasmine Shampoo and 4 000 for Mint Shampoo, with actual production of 13 500 litres and 4 500 litres respectively. Total machine hours for production were budgeted at 28 000 for Jasmine Shampoo and 4 000 for Mint Shampoo, with actual machine hours of 30 000 and 3 800 respectively. The 2015 budgeted figures represent a normal, average year, and overheads are allocated on the basis of machine hours using normal average long-term capacity per year. Determine the total applied overheads for the Mint Shampoo product for the year.Show the full question

  21. Question 5.3 · Standard costing and variance analysis · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Bathawk (Pty) Ltd manufactures a product called FlyTech. For April 2015 the following information applies: the standard variable direct material cost per unit is R112 (based on 4kg per unit), while the actual variable direct material cost in total for 6 000kg used was R162 000; standard variable manufacturing overheads per unit are R70 while actual variable manufacturing overheads per unit were R65; actual output produced and sold was 1 200 units against a budgeted output of 1 000 units; the actual selling price per unit was R480 while the standard selling price per unit was R500. Variable manufacturing overheads vary with production. Calculate the total material purchase price variance for April 2015.Show the full question

  22. Question 5.4 · Standard costing and variance analysis · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Using the same Bathawk (Pty) Ltd FlyTech information for April 2015 (standard variable direct material cost per unit R112 based on 4kg per unit; actual variable direct material cost in total for 6 000kg was R162 000; standard variable manufacturing overheads per unit R70; actual variable manufacturing overheads per unit R65; actual output 1 200 units versus budgeted output 1 000 units; actual selling price R480 per unit versus standard selling price R500 per unit; variable manufacturing overheads vary with production), calculate the total material variance for April 2015.Show the full question

  23. Question 5.5 · Standard costing and variance analysis · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Using the same Bathawk (Pty) Ltd FlyTech information for April 2015 (standard variable direct material cost per unit R112 based on 4kg per unit; actual variable direct material cost in total for 6 000kg was R162 000; standard variable manufacturing overheads per unit R70; actual variable manufacturing overheads per unit R65; actual output 1 200 units versus budgeted output 1 000 units; actual selling price R480 per unit versus standard selling price R500 per unit; variable manufacturing overheads vary with production), calculate the total variable manufacturing overhead efficiency variance for April 2015.Show the full question

  24. Question 5.6 · Standard costing and variance analysis · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Using the same Bathawk (Pty) Ltd FlyTech information for April 2015 (standard variable direct material cost per unit R112 based on 4kg per unit; actual variable direct material cost in total for 6 000kg was R162 000; standard variable manufacturing overheads per unit R70; actual variable manufacturing overheads per unit R65; actual output 1 200 units versus budgeted output 1 000 units; actual selling price R480 per unit versus standard selling price R500 per unit; variable manufacturing overheads vary with production), calculate the total selling price variance for April 2015.Show the full question

  25. Question 5.7 · Accounting for material, labour and overheads; inventory valuation · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. During April 2015 the following inventory transactions were recorded: on 1 April opening inventory was 1 000 units at R10 each; on 5 April purchases of 2 000 units at R8 each were made, with freight costs paid of R1 000; on 7 April a further purchase of 500 units at R11 each was made; and on 10 April, 3 200 units were issued to production. Determine the total value of inventory on hand at the close of business on 10 April 2015 using the first-in-first-out (FIFO) method of inventory valuation.Show the full question

  26. Question 5.8 · Accounting for material, labour and overheads; inventory valuation · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. Using the same April 2015 inventory transactions (1 April: opening inventory of 1 000 units at R10 each; 5 April: purchase of 2 000 units at R8 each with freight costs of R1 000 paid; 7 April: purchase of 500 units at R11 each; 10 April: issue of 3 200 units to production), determine the value of one unit of inventory at the close of business on 5 April 2015 using the weighted average method of inventory valuation.Show the full question

  27. Question 5.9 · Activity-based costing · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. A fellow student has asked for the factors that likely contributed to the complex manufacturing environment that caused many companies to adopt activity-based costing (ABC) instead of traditional costing. The possibilities under consideration are: (i) wider product ranges; (ii) more overheads being driven by production volumes; (iii) increased dumping; and (iv) more focus on quality. Indicate the correct combination of factors.Show the full question

  28. Question 5.10 · Process and joint product costing · 2 marks

    Candidates must answer the multiple-choice questions by writing, for each sub-question, the sub-question number together with the letter of the chosen alternative in the answer book (for example: 1.a). Note that where an alternative 'e' is offered, it should NOT be selected merely because the candidate's own answer differs from the other options only due to rounding. T. Thavhani (Pty) Ltd manufactures two products, Thophi and Tshidzimba, in a joint process. After the split-off point each product is separately processed further, at a cost of R5 per unit for Thophi and R2 per unit for Tshidzimba, before being marketed. Total joint costs for the year amounted to R1 200 000. During the year, 50 000 units of Thophi and 75 000 units of Tshidzimba were manufactured and sold. Using the physical standard method, determine the amount of joint costs for the year to be allocated to Thophi and Tshidzimba respectively.Show the full question

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