MAC2601 Oct/Nov 2015 exam paper — questions

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  1. Question 1.1 · Direct and absorption costing · 14 marks

    Question 1 relates to two related companies. Part A concerns Steinhopp Time Pieces (Pty) Ltd, which manufactures and supplies time pieces (including a model called Lerox) and values inventory using the FIFO method. Part B concerns Steinhopp Golf Carts (Pty) Ltd, a subsidiary of Steinhopp Time Pieces, which manufactures and supplies golf carts and has been awarded a contract by Menlyn Country Club to supply golf carts for the whole of the 2015 financial year. For Steinhopp Time Pieces (Pty) Ltd's Lerox product, the actual results for the year ended 30 September 2015 were: 3 800 units sold and 3 300 units produced; a selling price of R240 per unit; direct materials of R110 per unit; direct labour of R25 per unit; variable manufacturing overheads of R15 per unit; fixed manufacturing overheads absorbed of R20 per unit; total variable selling costs of R68 400; total non-manufacturing costs of R178 400; and no over- or under-applied overheads. The budgeted figures for the year ending 30 September 2016 are: a selling price of R250 per unit; direct materials of R120 per unit; direct labour of R30 per unit; variable manufacturing overheads of R16 per unit; and total fixed manufacturing overheads of R75 000. Additional information: (1) the budgeted quantity schedule for the year ending 30 September 2016 shows budgeted sales of 4 100 units, opening inventory of 500 units and closing inventory of 400 units; (2) variable selling costs for the 2016 budgeted year are expected to increase by R2 per unit compared with the 2015 actual figures; and (3) the R178 400 of non-manufacturing costs incurred in the year ended 30 September 2015 comprised both fixed administration costs and variable selling costs, and the fixed administration cost component is expected to increase by 10% in the 2016 budgeted year. Required: prepare the budgeted statement of comprehensive income of Steinhopp Time Pieces (Pty) Ltd for Lerox for the year ending 30 September 2016, using the absorption costing method.Show the full question

  2. Question 1.2.1 · Direct and absorption costing · 5.5 marks

    Question 1 relates to two related companies. Part A concerns Steinhopp Time Pieces (Pty) Ltd, which manufactures and supplies time pieces (including a model called Lerox) and values inventory using the FIFO method. Part B concerns Steinhopp Golf Carts (Pty) Ltd, a subsidiary of Steinhopp Time Pieces, which manufactures and supplies golf carts and has been awarded a contract by Menlyn Country Club to supply golf carts for the whole of the 2015 financial year. Steinhopp Golf Carts (Pty) Ltd, a subsidiary of Steinhopp Time Pieces, manufactures and supplies golf carts and has been awarded a contract by Menlyn Country Club to supply golf carts for the whole of the 2015 financial year. For its Fabulous Golf Cart Range, the company's total production cost in the 2014 financial year was R26 000 000 when 4 000 units were produced, and R36 000 000 when 6 000 units were produced. In 2015 the company manufactured and sold 500 golf carts at a selling price of R15 000 per cart. The production cost structure (i.e. the variable production cost per unit and the total fixed production cost) in 2015 is identical to that of 2014, and this cost structure remains unchanged for any production quantity between 1 and 10 000 units. Non-manufacturing costs must be ignored. Required: calculate the breakeven point, in units (golf carts), for the Fabulous Range for 2015.Show the full question

  3. Question 1.2.2 · Direct and absorption costing · 2.5 marks

    Question 1 relates to two related companies. Part A concerns Steinhopp Time Pieces (Pty) Ltd, which manufactures and supplies time pieces (including a model called Lerox) and values inventory using the FIFO method. Part B concerns Steinhopp Golf Carts (Pty) Ltd, a subsidiary of Steinhopp Time Pieces, which manufactures and supplies golf carts and has been awarded a contract by Menlyn Country Club to supply golf carts for the whole of the 2015 financial year. Using the same Steinhopp Golf Carts (Pty) Ltd Fabulous Range information (2014 total production cost of R26 000 000 at 4 000 units and R36 000 000 at 6 000 units; a 2015 selling price of R15 000 per cart; the same variable-cost-per-unit and total fixed cost structure applying to any output between 1 and 10 000 units; and non-manufacturing costs ignored), calculate the profit or loss for 2015 based on actual sales of 500 golf carts, and state clearly whether the result is a profit or a loss.Show the full question

  4. Question 1.2.3 · Direct and absorption costing · 3 marks

    Question 1 relates to two related companies. Part A concerns Steinhopp Time Pieces (Pty) Ltd, which manufactures and supplies time pieces (including a model called Lerox) and values inventory using the FIFO method. Part B concerns Steinhopp Golf Carts (Pty) Ltd, a subsidiary of Steinhopp Time Pieces, which manufactures and supplies golf carts and has been awarded a contract by Menlyn Country Club to supply golf carts for the whole of the 2015 financial year. Again using the Steinhopp Golf Carts (Pty) Ltd Fabulous Range information (2014 total production cost of R26 000 000 at 4 000 units and R36 000 000 at 6 000 units; a 2015 selling price per golf cart of R15 000; the same cost structure applying for any production quantity between 1 and 10 000 units; and non-manufacturing costs ignored), calculate the number of golf carts the company should sell in 2015 in order to earn a profit of R10 000 000.Show the full question

  5. Question 2.1(a)(i) · Process and joint product costing · 4 marks

    This question relates to three companies that belong to the same group, each using a different costing system: Thabang Traders (Pty) Ltd uses job costing, Progressio Limited uses process costing, and Ngoato (Pty) Ltd uses joint and by-product costing. All three parts (A, B and C) must be answered, and the information given for each part relates both to that part and to the question as a whole. Thabang Traders (Pty) Ltd, which uses job costing to manufacture customised products for its clients, recorded the following for September 2015: the direct material control account had an opening balance of R11 000, and direct materials purchased during the month amounted to R14 000. The direct materials required by the individual jobs during the month were R2 800 for Job A, R3 000 for Job B and R4 200 for Job C. Prepare the general ledger material control account of Thabang Traders (Pty) Ltd for the month of September 2015, and balance the account.Show the full question

  6. Question 2.1(a)(ii) · Process and joint product costing · 2.5 marks

    This question relates to three companies that belong to the same group, each using a different costing system: Thabang Traders (Pty) Ltd uses job costing, Progressio Limited uses process costing, and Ngoato (Pty) Ltd uses joint and by-product costing. All three parts (A, B and C) must be answered, and the information given for each part relates both to that part and to the question as a whole. For Thabang Traders (Pty) Ltd, the direct wages for September 2015, all paid in cash, were R4 100 for Job A (80 hours), R5 500 for Job B (108 hours) and R6 400 for Job C (124 hours). Prepare the general ledger salaries and wages control account of Thabang Traders (Pty) Ltd for the month of September 2015, and balance the account.Show the full question

  7. Question 2.1(b)(i) · Process and joint product costing · 3 marks

    This question relates to three companies that belong to the same group, each using a different costing system: Thabang Traders (Pty) Ltd uses job costing, Progressio Limited uses process costing, and Ngoato (Pty) Ltd uses joint and by-product costing. All three parts (A, B and C) must be answered, and the information given for each part relates both to that part and to the question as a whole. Thabang Traders (Pty) Ltd applies manufacturing overheads to jobs at a pre-determined rate of R20 per direct labour hour. Jobs A, B and C were all started in September 2015; Job A required direct materials of R2 800, direct wages of R4 100 for 80 labour hours, and was completed during the month with the customer invoiced for R10 000. Using this information, prepare the cost ledger account for Job A of Thabang Traders (Pty) Ltd for September 2015, and balance the account.Show the full question

  8. Question 2.1(b)(ii) · Process and joint product costing · 2.5 marks

    This question relates to three companies that belong to the same group, each using a different costing system: Thabang Traders (Pty) Ltd uses job costing, Progressio Limited uses process costing, and Ngoato (Pty) Ltd uses joint and by-product costing. All three parts (A, B and C) must be answered, and the information given for each part relates both to that part and to the question as a whole. Thabang Traders (Pty) Ltd applies manufacturing overheads to jobs at a pre-determined rate of R20 per direct labour hour. Job B, started in September 2015 and not yet completed, required direct materials of R3 000 and direct wages of R5 500 for 108 labour hours. Using this information, prepare the cost ledger account for Job B of Thabang Traders (Pty) Ltd for September 2015, and balance the account.Show the full question

  9. Question 2.1(c) · Process and joint product costing · 4 marks

    This question relates to three companies that belong to the same group, each using a different costing system: Thabang Traders (Pty) Ltd uses job costing, Progressio Limited uses process costing, and Ngoato (Pty) Ltd uses joint and by-product costing. All three parts (A, B and C) must be answered, and the information given for each part relates both to that part and to the question as a whole. Thabang Traders (Pty) Ltd allocates manufacturing overheads to Jobs A, B and C at a pre-determined rate of R20 per direct labour hour, based on 80 hours worked on Job A, 108 hours on Job B and 124 hours on Job C. The actual manufacturing overhead costs incurred for September 2015 were R6 000. Calculate the total over- or under-applied manufacturing overheads for all three jobs combined for September 2015, and draft the journal entry that would usually be used to deal with this over- or under-application in the company's books at the end of the period.Show the full question

  10. Question 2.2(a) · Process and joint product costing · 9 marks

    This question relates to three companies that belong to the same group, each using a different costing system: Thabang Traders (Pty) Ltd uses job costing, Progressio Limited uses process costing, and Ngoato (Pty) Ltd uses joint and by-product costing. All three parts (A, B and C) must be answered, and the information given for each part relates both to that part and to the question as a whole. Progressio Limited, a company in the same group as Thabang Traders (Pty) Ltd, manufactures a single product using a process costing system. For September 2015, opening work-in-progress amounted to 30 000 units that were 70% complete, and closing work-in-progress amounted to 25 000 units that were 80% complete. During the month, 118 000 new units were put into production and 108 000 units were completed and transferred. Normal losses are estimated at 5% of the units that reach or pass the wastage point, and these losses occur when the process is 90% complete. Raw materials are added at the beginning of the process, while conversion takes place evenly throughout the process. Prepare the quantity statement for Progressio Limited for September 2015, based on the first-in-first-out (FIFO) method of inventory valuation.Show the full question

  11. Question 2.2(b) · Process and joint product costing · 3 marks

    This question relates to three companies that belong to the same group, each using a different costing system: Thabang Traders (Pty) Ltd uses job costing, Progressio Limited uses process costing, and Ngoato (Pty) Ltd uses joint and by-product costing. All three parts (A, B and C) must be answered, and the information given for each part relates both to that part and to the question as a whole. Using the same September 2015 information for Progressio Limited (opening work-in-progress of 30 000 units 70% complete; closing work-in-progress of 25 000 units 80% complete; 118 000 units put into production; 108 000 units completed and transferred; normal losses of 5% of units reaching the wastage point, which occurs at 90% completion; raw materials added at the start of the process and conversion occurring evenly throughout), the cost records showed opening work-in-progress costs of R260 000 for raw materials and R168 000 for conversion, and costs added during September 2015 of R1 062 500 for raw materials and R994 500 for conversion. Prepare the production cost statement for Progressio Limited for September 2015, based on the first-in-first-out (FIFO) method of inventory valuation.Show the full question

  12. Question 2.3 · Process and joint product costing · 12 marks

    This question relates to three companies that belong to the same group, each using a different costing system: Thabang Traders (Pty) Ltd uses job costing, Progressio Limited uses process costing, and Ngoato (Pty) Ltd uses joint and by-product costing. All three parts (A, B and C) must be answered, and the information given for each part relates both to that part and to the question as a whole. Ngoato (Pty) Ltd, also part of the same group, operates a process that yields two joint products, Yellow and Blue. In September 2015 the joint production costs totalled R20 000. There was no opening inventory, and the entire month's production was sold; both joint products were processed further after the split-off point. For Yellow: the selling price per kilogram of the final product was R150, the total cost of further processing after split-off was R2 500, the total selling and distribution costs of the final product were R1 200, and the quantity at the split-off point (equal to the quantity of the final product) was 200 kilograms. For Blue: the selling price per kilogram of the final product was R165, the total cost of further processing after split-off was R3 150, the total selling and distribution costs of the final product were R1 400, and the quantity at the split-off point (equal to the quantity of the final product) was 300 kilograms. Prepare a statement of comprehensive income for Ngoato (Pty) Ltd for the month ended 30 September 2015, allocating the joint costs according to the physical standard method, and include separate columns for Yellow and Blue as well as a Total column.Show the full question

  13. Question 3(a) · Relevant costing for short-term decisions · 15 marks

    Beka's Business (Pty) Ltd operates in the sportswear industry and has recently established a cricket division, referred to as 'Division: Cricket'. This division is still deciding which single product it should buy and sell, choosing between three options: cricket bats, cricket balls, or wicket sets. Option 1, cricket bats: there is a 35% chance the division's profit for 2015 will be R500 000, a 50% chance the profit will be R200 000, and the only other possibility is a loss of R100 000. Option 2, cricket balls: these would be imported and sold locally. There is a 10% chance that customers will not like the product, resulting in a loss of R140 000. If customers do like the product, the following possibilities apply to the 2015 market: a 30% probability that the exchange rate improves, giving a conditional profit of R180 000; a 25% probability that the exchange rate stays constant, giving a conditional profit of R150 000; and a 45% probability that the exchange rate deteriorates, giving a conditional profit of R120 000. Option 3, wicket sets: this option offers a certain profit of R170 000, based on a special order already received. For Beka's Business (Pty) Ltd's Division: Cricket, draw a decision tree covering the three possible products (cricket bats, cricket balls, and wicket sets) using the profit/loss figures and probabilities given, and on the basis of quantitative factors alone recommend which product the division should choose to buy and sell. Show all your calculations.Show the full question

  14. Question 4.1 · Standard costing and variance analysis · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Scuba Steve (Pty) Ltd manufactures various items of scuba diving equipment, including snorkels, and its variable manufacturing overheads vary with direct labour hours worked. For September 2015, the actual direct labour hours worked totalled 3 170, the direct labour rate variance was R19 971 (favourable), the standard direct labour rate per hour was R81,50, the standard direct labour cost per snorkel was R32,60, and 6 340 snorkels were actually produced and sold (compared with a fixed budget of 6 000 snorkels). Based on this information, determine the actual rate per hour paid for direct labour in September 2015.Show the full question

  15. Question 4.2 · Standard costing and variance analysis · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Using the same September 2015 data for Scuba Steve (Pty) Ltd's snorkel production (actual direct labour hours worked of 3 170; a favourable direct labour rate variance of R19 971; standard direct labour rate of R81,50 per hour; standard direct labour cost of R32,60 per snorkel; actual snorkels produced and sold of 6 340 against a fixed budget of 6 000), calculate the direct labour efficiency variance for September 2015.Show the full question

  16. Question 4.3 · Standard costing and variance analysis · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. For Scuba Steve (Pty) Ltd's snorkel production in September 2015, the standard variable manufacturing overhead rate was R40 per labour hour while the actual variable manufacturing overhead rate was R43 per labour hour, and actual direct labour hours worked totalled 3 170. Calculate the variable manufacturing overhead rate variance for September 2015.Show the full question

  17. Question 4.4 · Standard costing and variance analysis · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Considering the direct labour rate variance calculated for Scuba Steve (Pty) Ltd's snorkel production in September 2015, identify which of the following is a plausible explanation for that variance.Show the full question

  18. Question 4.5 · Nature and behaviour of costs; cost estimation · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Identify what a manufacturing department is most likely to be classified as.Show the full question

  19. Question 4.6 · Budgeting · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Identify which of the following statements is NOT true of a fixed budget.Show the full question

  20. Question 4.7 · Relevant costing for short-term decisions · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Identify which of the following is NOT one of the preconditions for setting a special order price.Show the full question

  21. Question 4.8 · Activity-based costing · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Identify which of the following is NOT associated with the activity-based costing method.Show the full question

  22. Question 4.9 · Accounting for material, labour and overheads; inventory valuation · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Tennis Shoes (Pty) Ltd buys tennis shoes and resells them in bulk to retailers. On 1 June 2015 the company held 300 pairs of shoes in stock, valued at R650 per pair. During June 2015 the following transactions took place: on 3 June the company bought a further 500 pairs at R700 per pair; on 8 June it sold 400 pairs at a selling price of R1 000 per pair; and on 17 June it bought a further 200 pairs at R720 per pair, also paying an additional R6 000 in freight costs. Using the first-in-first-out (FIFO) method of inventory valuation, determine the value of inventory held immediately after the 17 June 2015 transaction.Show the full question

  23. Question 4.10 · Accounting for material, labour and overheads; inventory valuation · 2 marks

    For Question 4, answer each multiple-choice item by writing down the sub-question number together with the letter of the correct alternative (for example, 1.a). Note that when rounding is required you may need to choose the option closest to your calculated answer. Using the same Tennis Shoes (Pty) Ltd data for June 2015 (opening inventory on 1 June of 300 pairs at R650 per pair; purchase on 3 June of 500 pairs at R700 per pair; sale on 8 June of 400 pairs at R1 000 per pair; and purchase on 17 June of 200 pairs at R720 per pair plus R6 000 freight), calculate the weighted average cost per pair of shoes immediately after the 3 June 2015 transaction, assuming the weighted average method of inventory valuation is used.Show the full question

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