Mac3701 TL101
Mac3701 TL101
Mac3701 TL101
MAC3701
Semesters 1 and 2
IMPORTANT INFORMATION:
Note: This is an online module, and therefore your module is available on myUnisa.
However, in order to support you in your learning process, you will also receive some of the
study materials in printed format.
Open Rubric
CONTENTS
1. INTRODUCTION .......................................................................................................................... 3
1.1 To get started on myUnisa ............................................................................................................ 3
2. OVERVIEW OF THIS MODULE: MAC3701 ................................................................................. 3
2.1 Purpose ........................................................................................................................................ 3
2.2 Outcomes .....................................................................................................................................4
3. LECTURERS AND CONTACT DETAILS ..................................................................................... 4
3.1 Lecturer information ...................................................................................................................... 4
3.2 Department of Management Accounting ....................................................................................... 5
3.3 University ...................................................................................................................................... 5
4. MODULE-RELATED RESOURCES ............................................................................................. 6
4.1 Prescribed books .......................................................................................................................... 6
4.2 Recommended books ................................................................................................................... 6
4.3 Joining myUnisa ........................................................................................................................... 6
4.4 Printed support materials .............................................................................................................. 7
4.5 Discussion classes........................................................................................................................ 7
4.6 Tutors and E-Tutors ...................................................................................................................... 7
5. HOW TO STUDY THIS MODULE ONLINE .................................................................................. 8
5.1 What it means to study fully online? .............................................................................................. 8
5.2 Assignments ................................................................................................................................. 8
6. ASSESSMENT ............................................................................................................................. 8
6.1 Assignments and learning ............................................................................................................. 8
6.2 Compulsory assignment................................................................................................................ 8
6.3 Assignment questions ................................................................................................................... 9
6.4 General remarks ........................................................................................................................... 9
6.5 Due dates of assignments........................................................................................................... 10
6.6 Submission of assignments ........................................................................................................ 10
6.7 Plagiarism declaration................................................................................................................. 11
7. SEMESTER MARK AND FINAL EXAMINATION ....................................................................... 11
7.1 Compulsory assignments ............................................................................................................ 11
7.2 How to calculate your semester mark ......................................................................................... 12
7.3 How to calculate your final mark ................................................................................................ 12
8. MODULE-SPECIFIC STUDY PLAN ........................................................................................... 13
9. EXAMINATION ........................................................................................................................... 15
9.1 Examination period and examination paper ................................................................................ 15
9.2 Previous examination papers ...................................................................................................... 15
9.3 Calculator policy ......................................................................................................................... 15
10. CONCLUSION............................................................................................................................ 15
2
MAC3701/101/3/2015
IMPORTANT NOTE:
Assignment 1/2015, which is compulsory, gives you admission to the examination. If we do not receive
this assignment by the due date, you will not be allowed to write the examination. Also keep in mind that
assignment 1 contributes 25% to your semester mark and assignment 2 contributes 75% to your
semester mark.
Your assignments are included at the back of this tutorial letter (refer Annexure A to E).
1. INTRODUCTION
Dear Student
Greetings to you and welcome to the FULLY ONLINE module, MAC3701. We will do our best to make
studying this course interesting and rewarding. You will be well on your way to success if you start
studying early in the semester and resolve to put in a lot of effort when doing your assignments.
We cannot emphasise enough how important it is for you to register for a myLife e-mail address and be
able to log on to myUnisa for the purposes of studying this module.
Because this is a fully online module, you need to use myUnisa to study this course. You need to visit
the websites on myUnisa for MAC3701 frequently. The website for your module is MAC3701-15-S1
(semester 1) or MAC3701-15-S2 (semester 2).
We hope that you will have a very enjoyable and successful semester of study.
Because this is a fully online module, you need to go online to see your study materials and read what
to do for the module. Go to the website here: https://my.unisa.ac.za and login with your student number
and password. You will see MAC3701-15-S1 (semester 1) or MAC3701-15-2 (semester 2) in the row of
modules across the top of the webpage. If you cannot find the appropriate module site in the blocks you
can also check in the “More sites” block. Click on the module you want to open.
In addition, you will receive this tutorial letter and a printed copy of some of the online study materials
from your module. While these printed materials may appear to be different from the online study
materials, they are exactly the same and have been copied from the online myUnisa website.
2.1 Purpose
The purpose of this module is to equip students with the ability to apply various management accounting
techniques in order to make decisions. Students learn how information is evaluated and used to control
and improve business performance. This module is primarily intended for people who are interested in
qualifying as registered Chartered Accountants (SAICA) or Management Accountants (CIMA). This
module will enable students to develop some of the necessary competencies prescribed by these
professional bodies.
3
The module is delivered via myUnisa by using the Internet. Peer group interaction takes place in the
discussion forum and is used as a tool to communicate with fellow students. Lecturers will interact
with students mainly on myUnisa and via e-mail.
2.2 Outcomes
In MAC2601 you were introduced to the principles of management accounting. Here you acquired a
basic knowledge of cost classification, cost behavior, cost analysis, cost estimation, cost objects and
cost management accounting systems. You should also understand and be able to apply planning,
budgeting and control techniques. Furthermore, MAC2601 enabled you to analyse financial and other
data to provide information for decision-making.
Please do not hesitate to consult lecturers by e-mail or personally (by prior arranged appointment only),
should you experience specific problems regarding the content of this course. Please have your study
material open online when you contact us. Please note that enquiries with regards to matters not relating
to the content of the course (e.g. registrations, non-receipt of study material, enquiries in respect of
exam dates, venues, etc) must not be directed to your lecturer but can be e-mailed to the appropriate
department’s e-mail address. See 3.3 below.
4
MAC3701/101/3/2015
The Department of Management Accounting is situated in Pretoria, at the main campus in the AJH van
der Walt Building.
3.3 University
To contact the University, you should follow the instructions in the myStudies@Unisa brochure.
Remember to have your student number available when you contact the University.
Please refer below for general contact information for the College of Accounting Sciences:
You can also contact the following personnel at the CAS Student Information Hub:
Enquiries regarding registrations can be directed to the CAS Student Information Hub
5
4. MODULE-RELATED RESOURCES
Your prescribed textbooks for this module for this semester (2015) are:
Please make sure that you obtain the bundle that includes the textbook (accompanied with
access to online CourseMate resources) and the student manual.
Please note: The 2014 prescribed textbooks for this module will still be acceptable for 2015. We do,
however, recommend that you rather obtain the 9th edition as the 9th edition will be prescribed from
2015 on CTA-level:
The publisher of the text books offers access to online CourseMate resources. It should, however, be
noted that MAC3701 mainly refers to the CourseMate resources for enrichment activities.
Please consult the list of official booksellers and their addresses in myStudies@Unisa.
Please note:
It is essential that you either acquire or have the prescribed textbooks at your disposal.
We recommend that you purchase the prescribed textbook, as you will have to study it thoroughly and
refer to it frequently. We suggest that you obtain the books as soon as possible.
It is important for you to enrich your studies by reading as extensively as possible and to use other
sources to supplement the prescribed textbooks.
6
MAC3701/101/3/2015
You can start at the main Unisa website, http://www.unisa.ac.za, and then click on the myUnisa orange
block. This will take you to the myUnisa website. To go to the myUnisa website directly, go to
https://my.unisa.ac.za. When you are on the myUnisa website, click on the “Claim UNISA Login” at the
right-hand side of the screen. You will then be prompted to give your student number to claim your initial
myUnisa as well as myLife login details.
Please consult the publication myStudies@Unisa which you received with your study material for more
information on myUnisa.
Because we want you to be successful in this online module, we will also provide you with, some of the
study material, in printed format. This will allow you to read the study material, even when you are not
online.
• The printed study material will be sent to you at the beginning of the semester, but you do not
have to wait to receive them to start studying – you can go online as soon as you register and all
your currently available study material will be there.
• Therefore, the printed material is not something that you need to wait for before you start with the
module. It is only an offline copy of the formal content for the online module.
• This will give you the chance to do a lot of the studying of this module without having to go to the
internet or an internet cafe. This will save you money, of course, and you will be able to take as
much time as you need to read - and to examine - the materials.
It is therefore very important that you log into myUnisa regularly. We recommend that you should do this
at least every week or every 10 days to check for the following:
• Check the Home page for any relevant information or updates. Refer to the Home page for
reminders regarding assignment deadlines and other relevant information.
• Check for new Announcements. You can also set up your myLife email so that you receive the
Announcement emails on your cell phone.
• Check the Discussion forum. You can share your thoughts on the different topics with the other
students in your group. (Please note however that you are not allowed to post your answers to
any of the assignments!)
We hope that this system will help you to succeed in this online module by giving you extra ways to
study the materials and practice with all of the activities and assignments. At the same time, you must
go online in order to complete the activities and assignments on time - and to get the most from the
online course.
Remember: the printed support materials are simply a back-up of some of the materials that are found
online on myUnisa. There is no additional information in the printed tutorial letters. In other words, you
should not wait for the Printed support materials to arrive to start studying.
Information on discussion classes for MAC3701 will be communicated to students during the semester.
There is a possibility that Tutors and E-Tutors will be available for MAC3701. More information regarding
this matter will be communicated to students during the semester.
7
5. HOW TO STUDY THIS MODULE ONLINE
• All your study materials are designed to be online, on myUnisa. Even though we give you a
printed copy of the study guide to support your studies, the module is designed for online use. Your
assignments will also be available online on myUnisa.
• Students may submit written assignments that should be typed and submitted online in a PDF
document in the same manner that all other assignments are submitted online. Posted written
assignments are also acceptable but online submission is recommended. The MCQ (multiple
choice questions) assignment has to be completed on a mark-reading sheet either by post or
Mobile MCQ submission or electronically via myUnisa. No assignments may be submitted by fax
or e-mail.
• Note that it will be wise to submit assignments electronically via myUnisa a few days before the
due date as the system is often overloaded on the due date. If the system gives an error
message, please wait a while and try again until your assignment is accepted.
• All of the communication between yourself and the University also happens online – by e-
mail and in the discussion forum. You can use these ways to ask questions and contact your
lecturers. This also means that your lecturers will communicate with you in the same way – through
e-mails, with announcements and in the discussion forum on myUnisa. The lecturers also send
important sms’es to students from time-to-time and it is therefore important to make sure Unisa has
your most updated contact details.
5.2 Assignments
Your assignments are included at the back of this tutorial letter (refer Annexure A to E) and is also
available online on myUnisa.
6. ASSESSMENT
6.1 Assignments and learning
Assignments and tutorial letters form an integral part of your tutorial matter and you must study them for
examination purposes.
When you submit the compulsory assignment (Assignment 1) on time, it will prove that you are an active
student and will therefore earn you admission to the examination. The mark you obtain for the
compulsory assignment will have no influence on your admission to the examination. However, it will
contribute towards your semester mark.
You will undoubtedly realise the importance of commencing your study programme in good time so that
you can obtain admission to the examination and earn a good semester mark.
8
MAC3701/101/3/2015
Your assignments are included at the back of this tutorial letter (refer Annexure A to E) and is also
available online on myUnisa. From the menu on your left, select "Home". Then click on the link provided
for each assignment. You can find the links in the “Welcome” message on your home page.
(a) You must submit the compulsory assignment (Assignment 1) to be received by the University
before or on the due date to obtain admission to the examination. Make sure you mark it as "1".
(b) It is in your own interest to retain a copy of the proof you received when submitting
Assignment 1, so that you can produce this in the event of any dispute concerning whether or not
the assignment was received.
1) Although students are encouraged to work together in groups, remember to always submit your
own work. If we see that you've copied someone else's work, you will get a mark of zero.
2) Please make sure you submit the correct documents for your respective assignments. The
lecturers will not phone you to inform you if they discover that you've submitted the incorrect or an
incomplete assignment. It is your own responsibility to submit the correct assignment, in PDF-
format, else you will get a mark of zero.
3) Assignments received after the due date will not be marked and students will get a mark of zero for
the assignment.
(d) Your semester mark will contribute 20% towards your final mark (if you obtain at least 40% in
the examination). The assignments will contribute to the semester mark as follows:
Assignment 1 25%
Assignment 2 75%
Assignment 3 0%
Assignment 3 is not compulsory and you needn’t submit this assignment. It is however in your own
best interest to work through this assignment thoroughly as it will be good for your examination
preparation.
Plagiarism is the act of taking the words, ideas and thoughts of others and passing them off as your own.
It is a form of theft which involves a number of dishonest academic activities. All students receive the
Disciplinary code for students (latest version) at registration. Please study the code. Kindly read Unisa's
Policy on copyright infringement and plagiarism as well.
If you worked together in a study group, remember that you still have to submit your own work, written
in your own words. If the lecturers find any similar-looking/worded assignments, all parties involved will
get zero for their assignment mark.
By submitting any MAC3701 assignment, you automatically declare that you have submitted your own
work and that you are aware of the consequences of being guilty of plagiarism.
9
6.5 Due dates of assignments
The due dates for the submission of the assignments are as follows:
Semester 1 Semester 2
Assignment Unique number Due date Unique number Due date
01 595954 09/03/2015 596215 17/08/2015
02 596013 30/03/2015 596223 07/09/2015
03 596068 21/04/2015 596263 28/09/2015
Although you may still submit assignments by post, we would like to encourage you to submit them
online on myUnisa in PDF-format, since this is a fully online module. The MCQ (multiple choice
questions) assignment has to be completed on a physical mark-reading sheet if it is not completed online
via the myUnisa equivalent of a mark-reading sheet. Physical mark-reading sheets may be submitted by
post or answers may be selected and submitted electronically via myUnisa. Please refer to the brochure
myStudies@Unisa on how to submit the assignment on a mark-reading sheet or electronically via
myUnisa.
The written assignment needs to be written or typed, and then posted or submitted in a PDF document
online on myUnisa.
Please make sure that you submit the correct and complete document. The lecturers will not phone you
to inform you if you’ve submitted the wrong assignment/document. It is your own responsibility to submit
the correct assignment.
• Go to http://my.unisa.ac.za.
• Enter your student number and password.
• Select the module.
• Click on "Assignments" in the left-hand menu.
• Click on the number of the assignment you want to submit.
• Follow the instructions on the screen.
Receipt of assignments after the due date disrupts the marking programme and the uncontrolled
submission of assignments furthermore creates administrative problems. You are requested to carefully
note the undermentioned requirements and suggestions and to adhere strictly to them.
10
MAC3701/101/3/2015
PLAGIARISM DECLARATION
I declare that this assignment, submitted by myself, is my own work and that I have referenced
all the sources that I have used.
By submitting any MAC3701 assignment, I declare that:
• I have read the Unisa Students’ Disciplinary Code;
• I know what plagiarism is, that plagiarism is wrong and that disciplinary steps can
be taken against me if I am found guilty of plagiarism;
• My assignments for MAC3701 are my own work;
• I have not allowed any other student to copy my work;
• I know that if I am found to be in violation of this declaration I will receive 0% for
the assignments involved.
Please note: You do not have to submit the declaration. By submitting any MAC3701
assignment, you automatically declare that you adhere to all the above with regard to the
specific assignment.
NB: Although students may work together when preparing assignments, each student must
write/type and submit his or her own individual assignment. It is unacceptable for students to
submit identical assignments on the basis that they worked together. That is copying (a form of
plagiarism) and none of these assignments will be marked. Furthermore, you may be penalised
or subjected to disciplinary proceedings by the University.
For students to benefit from our formative tuition and assessments, the management of the University
decided to introduce compulsory assignments for all modules.
Submission of compulsory assignment 1 will earn you admission to the examination. This assignment
consists of multiple choice type questions. The mark you earn for compulsory assignment 1 will
contribute 25% towards your semester mark, which weighs 20% in the calculation of your final mark.
Assignment 2 is a written assignment which contributes 75% towards your semester mark, which
weighs 20% in the calculation of your final mark. Although non-submission of this assignment will not
influence your exam admission, we sometimes still refer to this assignment as compulsory as it is
impossible to earn a decent semester mark without submitting this assignment.
Please note that it is practice in our Department to only mark selected sections of a written
assignment. You can therefore not afford to leave out any questions as they might form part of
the selected questions for marking.
The lecturers will not inform you upfront on which question(s), or parts thereof, will be selected
for marking. Do not phone the lecturers to ask which questions will be marked. They will not
inform you.
11
Assignment 3 is not compulsory. It is a written assignment that does not contribute towards your
semester/final mark. You needn’t submit this assignment as it will not be marked. You are encouraged to
work through this assignment and its suggested solution thoroughly as we believe it will be good for your
examination preparation.
PLEASE NOTE: Enquiries about assignments (e.g. whether or not the University has received
your assignment or the date on which an assignment was returned to you) must be e-mailed to
assign@unisa.ac.za
The mark obtained for compulsory assignment 1 counts 25%, the mark obtained for assignment 2
counts 75% and the mark obtained for assignment 3 counts 0%, giving a semester mark out of 20%
towards the final mark.
Students require a combined final mark of at least 50% to pass a module. This final mark is calculated as
follows:
Semester mark
= A mark out of 25% for assignment 1 + a mark out of 75% for assignment 2 + a mark out of 0% for
assignment 3
Final mark
= 20% x semester mark + 80% x mark obtained in the examination.
If a student fails the examination with less than 40%, the semester mark will not be used to calculate the
final mark. How it will work in practice?
The marks you obtain for the compulsory assignments 1 and 2 will count towards your semester mark,
contributing towards a possible maximum of 20% accounted for in your final mark. Your semester mark
will, however, only be taken into account to calculate your final mark if you obtained 40% or more in the
examination.
• mark (%) for compulsory assignment 1: 25% weight in semester mark (5% weight in final mark)
• mark (%) for compulsory assignment 2: 75% weight in semester mark (15% weight in final mark)
The semester mark will contribute 20% towards your final mark. The mark you obtain in the examination
will be restated to be out of 80% and your semester mark will be restated to a mark out of 20%. If you
earn 75% for compulsory assignment 1, 65% for compulsory assignment 2 and 48% for the examination,
your final mark will be 51,9%
Example:
Semester mark: 18,75 + 48,75 = 67,50 x 20% = 13,50
Exam mark: 48,00 x 80% = 38,40
Final mark: 51,90%
A subminimum of 40% in the examination is, however, required before the semester mark will be
taken into account in calculating your final mark.
12
MAC3701/101/3/2015
Plan your studies properly so as to achieve specific study goals at predetermined dates. This avoids a
haphazard approach to your studies and the use of ineffective study techniques.
First priority - Compulsory assignment 1 (to gain admission to the examination and contributing
25% towards your semester mark)
Study Topics 1 (Advanced behavioural aspects of costs) and 2 (Advanced concepts in costing systems).
This assignment could also possibly include some of your MAC2601 work. Please make sure that you
are familiar with all your MAC2601 work as it is a pre-requisite to and assumed knowledge for module
MAC3701.
Complete and submit compulsory assignment number 1 before the due date. This is a multiple choice
questions (MCQ) assignment.
All the topics can be tested in this assignment and you will therefore have to also study the following
topics in order to submit a proper attempt for assignment 2:
Topic 3 (Integrated planning and budgeting), topic 4 (Standard costing), topic 5 (Performance
management in decentralised entities), topic 6 (Relevant decision making in various scenarios), topic 7
(Pricing for internal and external purposes) and topic 8 (Advanced aspects of sensitivity analysis).
Revise topics 1 and 2 if required.
Complete and submit compulsory assignment number 2 before the due date. This is a written
assignment.
Third Priority – Assignment 3 (does not contribute towards your semester mark)
All the Topics (including this assignment) are important for your examination preparation.
It is in your own interest to complete assignment number 3 before the due date. This is a written
assignment. You need not submit this assignment as it will not be marked. You should mark the
assignment yourself based on the suggested solution.
13
Suggested study programme for 2015
Semester 1
Date Topics from the study material Assignment Due date
09/03/2015 Revise topics 1 – 5 (if required) and also study: 2/2015 Semester 1 30/03/2015
to Topic 6 – Relevant decision making in various (topics 1 – 8)
27/03/2015 scenarios
Topic 7 – Pricing for internal and external purposes (FOR 75% CONTRIBUTION
Topic 8 – Advanced aspects of sensitivity analysis TOWARD SEMESTER MARK)
30/03/2015 Revise Topics 1 – 8. This includes not only 3/2015 Semester 1 21/04/2015
to revision of the contents of the study guide and (topics 1 – 8)
17/04/2015 its references to the prescribed text books, but
also all the tutorial letters, announcements, etc. (FOR 0% CONTRIBUTION
that are available on myUnisa. TOWARD SEMESTER MARK –
self assessment does not
have to be handed in)
Semester 2
Date Topics from the study material Assignment Due date
17/08/2015 Revise topics 1 – 5 (if required) and also study: 2/2015 Semester 2 08/09/2015
to Topic 6 – Relevant decision making in various (topics 1 – 8)
04/09/2015 scenarios
Topic 7 – Pricing for internal and external purposes (FOR 75% CONTRIBUTION
Topic 8 – Advanced aspects of sensitivity analysis TOWARD SEMESTER MARK)
07/09/2015 Revise Topics 1 – 8. This includes not only 3/2015 Semester 2 29/09/2015
to revision of the contents of the study guide and (topics 1 – 8)
25/09/2015 its references to the prescribed text books, but
also all the tutorial letters, announcements, etc. (FOR 0% CONTRIBUTION
that are available on myUnisa. TOWARD SEMESTER MARK -
self assessment does not
have to be handed in)
14
MAC3701/101/3/2015
9. EXAMINATION
The exam will consist entirely of written questions. There will be no multiple-choice questions.
During the year, the Examination Section will provide you with information regarding the examination in
general, examination venues, examination dates and examination times.
A mock exam will be made available as your Assignment 3. Students are also encouraged to attempt
the 2014 papers and send their attempts to the lecturers for marking. You may assume that you will not
have seen the examination questions before but it will be a similar difficulty level to the questions asked
in the activities in your study guide, your text books, the assignments and/or other official study material
of the module.
Candidates may only use silent, electronic, battery-driven pocket calculators (non-programmable
financial calculators will be allowed) subject to the following conditions:
• Calculators must be cordless, and may not have print-out facilities or alpha keys;
• Candidates may not share a calculator with another candidate in the examination room.
10. CONCLUSION
In spite of care taken to ensure that study guides, assignments and suggested solutions are
comprehensive and free from errors, omissions and discrepancies may occur. Should you come across
such matters, or matters which are not clearly expressed, kindly let us know to enable us to effect the
necessary corrections.
Do not hesitate to contact your lecturer by e-mail if you are experiencing problems with the content of
this tutorial letter or any aspect of the module.
We wish you a fascinating and satisfying journey through the learning material and trust that you will
complete the module successfully.
MAC3701 lecturers
15
ANNEXURE A
IF YOU ARE REGISTERED FOR THE FIRST SEMESTER, YOU MUST COMPLETE THIS
ASSIGNMENT.
THE MARK YOU EARN FOR COMPULSORY ASSIGNMENT 01 WILL CONTRIBUTE 25%
TOWARDS YOUR SEMESTER MARK, WHICH WEIGHS 20% IN THE CALCULATION OF
YOUR FINAL MARK.
Please remember to enter the correct unique number of the assignment on the mark-reading
sheet.
Zoom (Pty) Ltd is a retailer of flat computer screens for offices. The annual demand is 2 600
screens. Sales take place evenly throughout the year. The company trades for 52 weeks per
annum.
The purchase price per screen is R3 900. The company executes its orders within two weeks
and maintains a safety inventory of 50 screens. The cost to place an order is R120.
The direct inventory holding cost is R20 per screen per annum. Insurance costs amount to 5%
of direct inventory holding costs per screen per annum. The after tax cost of capital of Zoom
(Pty) Ltd is 10%.
16
MAC3701/101/3/2015
QUESTION 1
The economic order quantity (EOQ) for the flat computer screens is …
(1) 32 screens.
(2) 41 screens.
(3) 39 screens.
(4) 177 screens.
(5) None of the above options.
QUESTION 2
The total inventory holding costs for the flat computer screens are …
QUESTION 3
QUESTION 4
The total annual ordering costs for the economic order quantity are …
(1) R7 680.
(2) R9 840.
(3) R1 800.
(4) R8 040.
(5) None of the above options.
17
The following information must be used for purposes of answering questions 5 to 8.
Tso (Pty) Ltd is a hospitality group with interests in casinos, hotels and theme parks. The
operating results for the three divisions, Casino, Hotel and Theme park, for the year ended 28
February 2015, are as follows:
Divisions Total
Casino Hotel Theme park
R R R R
Sales 2 000 000 3 000 000 5 000 000 10 000 000
Less: cost of sales 1 200 000 2 300 000 2 000 000 5 500 000
Less: overheads 1 000 000
Profit 3 500 000
R
Administrative staff salaries 510 000
Warehouse staff salaries 100 000
Marketing staff salaries 320 000
General overheads 70 000
1 000 000
Salaries, wages and general overheads are considered to be of a fixed nature, except for 30%
of general overheads which vary in line with the cost of sales per division.
Activity Driver
Administrative staff salaries No of orders executed plus no of tokens sold
Warehouse staff salaries No of orders executed
Marketing staff salaries No of tokens sold
Fixed general overheads incurred Floor space
Tso (Pty) Ltd makes use of an activity-based costing (ABC) system to allocate overhead costs
to their three divisions.
Hint: Usually with activity-based costing, an activity rate is calculated. The activity rate can be
calculated by dividing the activity cost by the cost driver volume (for example no of orders
executed). Multiplying the activity rate by the cost driver volume calculates the allocated
amount. For purposes of this question – do not round your activity rate to two decimals – this
will result in you getting the incorrect answer. Only round the final allocated amounts to two
decimals.
18
MAC3701/101/3/2015
QUESTION 5
The total variable overhead costs for the Casino division are …
(1) R4 581,82.
(2) R7 000,00.
(3) R5 250,00.
(4) R8 400,00.
(5) None of the above options.
QUESTION 6
QUESTION 7
QUESTION 8
The following information must be used for purposes of answering questions 9 and 10.
Soft Leather CC has recently started with the manufacturing of soft leather shoes. To date the
company has completed and sold four pairs shoes. The total time to complete the first two
shoes was 15,76 hours and the total time to complete the first four shoes was 30,1088 hours.
This trend is similar to that experienced in the manufacturing of similar products. Experience
has shown that this trend will last for the manufacturing of the first sixteen soft leather shoes.
19
Hint: You need to calculate the cumulative average time per shoe and not per pair of shoes.
The learning curve applies to every doubling of shoes manufactured and does not apply to
every pair of shoes manufactured. In all your calculations, round your figures to four decimals
and if your final answer differs from the options below with only a few decimal places, select the
option closest to your answer.
QUESTION 9
(1) 51,5464%.
(2) 97,00%.
(3) 103,0928%.
(4) 96,00%.
(5) None of the above options.
QUESTION 10
The total time taken for the manufacturing of the “next” four pairs of shoes is …
Hint: You need to calculate the total time that it will take to manufacture shoe 9 up to shoe 16.
The following is an extract from the operation manager’s report provided to the operations
committee at the end of the financial year:
QUESTION 11
(1) R1 500.
(2) R2 250.
(3) R2 500.
(4) R2 750.
(5) None of the above options.
20
MAC3701/101/3/2015
QUESTION 12
(a) The correlation coefficient (r) indicates the extent of a relationship between
dependent and independent variables.
(b) High-low is a method of analysing cost behavior that consists of selecting the periods
of highest and lowest activity levels and comparing the changes in cost that result
from the two levels in order to separate the fixed and variable costs from each other.
(d) An independent variable is a variable, such as cost, that changes when a dependent
variable, such as volume, is varied.
(1) a and c
(2) b and d
(3) a, b and c
(4) a and b
(5) None of the above options.
The following information must be used for purposes of answering questions 13 to 16.
21
Additional information:
1. Normal losses are estimated at 15% of the input that reaches the wastage point.
2. Losses occur at the end of the process.
3. Amakhemikhali Ltd values their stock according to the weighted average method.
QUESTION 13
The equivalent material cost per unit for Amakhemikhali Ltd for the month of April 2015 is as
follows:
QUESTION 14
The total rand value assigned to the abnormal loss units of Amakhemikhali Ltd for the month of
April 2015 in the cost allocation statement would be as follows:
(1) R 61 650,00
(2) R 51 000,00
(3) R 70 537,76
(4) R116 700,45
(5) None of the above.
QUESTION 15
If losses no longer occur at the end of the process, but when the process is 40% completed,
and Amakhemikhali Ltd now values their stock according to the first-in-first-out (FIFO) method,
what would the equivalent units in terms of material be?
(Note: You have to use the short-cut method if all the requirements for its usage are met.)
22
MAC3701/101/3/2015
QUESTION 16
If losses no longer occur at the end of the process, but when the process is 40% completed and
Amakhemikhali Ltd values their stock according to the first-in-first-out (FIFO) method, what
would the equivalent units in terms of conversion cost be?
(Note: Do not use the short-cut method, even if the requirements for its usage are met.)
QUESTION 17
(a) When a group of individual products is produced simultaneously and each product
has a significant relative sales value, the outputs are usually called joint products.
(b) By-products are those products that results incidentally from the main joint product.
(c) By-products usually influence the decision as to whether or not to produce the main
product.
(d) Joint and by-products are identifiable as different individual products at the split-off
point.
(1) a and d
(2) a and b
(3) a, c and d
(4) a, b and d
(5) None of the above options.
The following information must be used for purposes of answering questions 18 to 20.
Company B simultaneously produces three products (A, B and C) from a single process.
Products A and B are processed further before they can be sold. Product C is a by-product that
is sold at split-off point for R70 per unit after incurring further processing costs of R10 per unit. A
regular market exists for Company B’s by-product. The sales prices of products A and B after
further processing are R494 per unit and R604,50 per unit respectively.
23
Data for March 2015 are as follows:
QUESTION 18
Joint costs are apportioned using the sales value at split-off point method. The total cost of
product A for March 2015 is …
QUESTION 19
Joint costs are apportioned using the physical standards method. The total cost of product B
for March 2015 is …
(Round the percentage of [units per product]/[total units produced] to 2 decimals, example
xx,xx% before you allocate the joint cost based on this percentage.)
QUESTION 20
Assuming that all three products are joint products and joint costs are apportioned using net
realisable value (NRV) method. The total cost of product B for March is …
For the purpose of this question, Product C has a sales value of R450 per unit and further
processing cost for Product C amounts to R180 000.
(Round the percentage of estimated [product NRV @ split off point]/[total NRV @ split off point]
to 2 decimals, example xx,xx%, before you allocate the joint costs based on this percentage.)
24
MAC3701/101/3/2015
ANNEXURE B
You must write and post this assignment or type and submit it as a PDF document online on
myUnisa. The lecturers prefer that you submit the assignment on myUnisa as postal
strikes cause unnecessary delays in the marking and sending back of assignments.
Please note that it is practice in our Department to mark selected sections of a written
assignment only. You can therefore not afford to leave out any questions as they might
form part of the selected questions for marking.
We will not inform you upfront which question(s), or parts thereof, we will select for
marking. Do not phone us to ask which questions will be marked. We will not tell you!
QUESTION 1
Sizwe (Pty) Ltd is a manufacturer of solar-power geysers. The company manufactures three
types of solar geysers, Alpha, Omega and Yale. The following information is available for the
year ended 30 April 2015:
*New information on water and electricity rates became available shortly after the initial
budget has been set, which had a positive effect on the expected demand for solar
geysers. The information indicated that the selling price would increase by 25% from the
previously set prices, as solar geysers have become extremely popular overnight.
25
Budgeted statement of profit or loss and other comprehensive income of Sizwe (Pty) Ltd for the
year ended 30 April 2015:
Additional information:
1. A detailed analysis of the overhead costs shows that they are made up of a portion of
overheads that are driven by the number of machine hours used, a portion of overheads
that are driven by labour hours and a portion of product-specific fixed overheads. The
general overheads cannot be allocated to the different products. The details are as
follows:
Overhead cost R
Machine hour related 200 000
Labour hour related 220 000
Product-specific overhead:
- Alpha 150 000
- Omega 110 000
- Yale 200 000
General fixed overhead 20 000
Total 900 000
2. Sizwe (Pty) Ltd has a loan from ABC Bank of R1 100 000 that bears interest at 10% per
annum payable in advance.
Required
Prepare a budgeted statement of profit or loss and other comprehensive income of Sizwe (Pty)
Ltd for the year ended 30 April 2015, which is more useful for decision-making purposes and
shows the overheads per product type. Your statement should have columns for each product
type as well as a total column. (13)
QUESTION 2
DEF Ltd has implemented a process in which the standard mix for producing 9 litres of output is
as follows:
R
4 litres of Delta at R9 per litre 36,00
3,5 litres of Echo at R5 per litre 17,50
2,5 litres of Foxtrot at R2 per litre 5,00
58,50
26
MAC3701/101/3/2015
A standard loss of 10% of inputs is expected to occur. The actual inputs for the latest period
were:
R
4 300 litres of Delta at R9,00 per litre 38 700
3 600 litres of Echo at R5,50 per litre 19 800
2 100 litres of Foxtrot at R2,20 per litre 4 620
63 120
Required
b) Explain the difference between the standard clock hour rate and the standard work hour rate
that are used in the calculation of certain labour variances. Illustrate the difference between
these two concepts using your own example. (3)
The sales margin volume variance is expressed in standard unit contribution margin for a
_____________ costing system and standard unit __________ margins for an absorption
costing system. In both cases, this is multiplied by the difference between the actual units
sold and the budgeted units to be sold.
QUESTION 3
Division B of NML Limited currently has net assets of R280 000 and earns an annual profit after
depreciation of R42 750. The divisional manager is considering an investment of R80 000 in an
asset which will have a ten-year life with no residual value and will earn a constant annual profit
after depreciation of R8 700. The cost of capital for NML Limited is 10%.
Required
a) Calculate the following and briefly explain whether the divisional manager would want to
undertake the new investment or not, based on the results:
i) The return on divisional investment (ROI) before and after the new investment (3)
ii) The divisional residual income (RI) before and after the new investment (4)
27
b) Explain (supporting your answer with calculations) whether the divisional manager would
be acting in the best interest of NML Limited if he chooses not to undertake the new
investment. (2)
c) Which method of performance evaluation (that is, ROI or RI) would be more useful when
comparing divisional performance? Give reasons for your answer. (2)
[BPP-adapted]
QUESTION 4
CTP (Pty) Ltd is a manufacturer of ceramic tiles for both household and office use. The
company is currently considering tendering for the manufacturing of 10 000 m2 tiles for a local
municipality in the Tshwane area. The tender will take six months to complete.
The company policy is to add a mark-up of 15% on costs in order to arrive at a final tender
price.
You have been presented with the following information regarding this tender:
Raw materials
Each m2 tile requires 1 kg of cement material. There is 10 000 kg of cement material on hand
in inventory at the moment. This material is used regularly in the production process. This
material was bought at an original cost of R6,50 per kg. Currently the market price of the
cement material is R7,00 per kg.
Special paint will be required for these tiles. Half of the litres required are in stock and the
company wrote it off in the prior year. The paint in stock originally cost the company R20 000
and the cost of the other half will amount to a further R32 000.
A silver mould will be required for this tender and it will be purchased from a Durban-based
supplier at a cost of R38 000.
Labour
The company currently has spare capacity and no overtime will be worked by current
employees to meet the tender.
A supervisor will be transferred to this project for its full duration of six months. When the
project is complete, he will return to his current position. His monthly salary is R12 000 per
month.
The company will appoint six temporary employees on a six-month contract to work on this
tender at a cost of R3 000 per month.
Overheads
The company currently incurs variable manufacturing overheads of R5 per m2 tile. This cost
will not change for the duration of the tender.
The company’s normal fixed manufacturing overheads are R100 000 per month and
additional overheads of R10 000 per month will be incurred in order to satisfy the requirements
of this tender.
28
MAC3701/101/3/2015
Other costs
In order to meet the requirements of the tender, the company has to rent additional factory
space at a cost of R10 000 per month. An additional R30 000 will be spent on setting up the
factory for this purpose. The company will incur R15 000 for the six months on administrative
overheads because of this tender.
Required
a) Calculate the price at which CTP (Pty) Ltd should tender. Indicate the reasons for including
and excluding amounts in your calculations. (20)
Use the following format for your answer:
(We have included the first amount and explanation in order to illustrate what is expected of
you.)
Item Description Relevant
amount
Cement Where materials are taken from existing inventories, the original R0
material purchase price (R6,50 per kg) represents a past or sunk cost
and it is therefore irrelevant for decision making.
b) List three non-financial factors that should be considered by CTP (Pty) Ltd in deciding
whether to tender or not. (3)
QUESTION 5
Shapes Ltd is a decentralised company that evaluates its divisions based on Return on
Investment (ROI). The Circle Division has the capacity to produce 10 000 units of a component.
The Circle Division’s components’ variable costs are R160 per unit.
The Square Division can use components of the Circle Division in the manufacturing of one of
its own products. The Square Division would incur R120 of variable costs to convert the
component into its own product, which sells for R600.
The Hexagon Division is considering investing in a new product. The cost price per unit for this
product will be R390 and the annual demand for the new product will be 45 000 units. The new
product requires an investment of R9 000 000 and the target divisional rate of return on capital
is 12%.
Required
a) Briefly explain the four purposes for which transfer pricing can be used. (4)
b) Assume the Circle Division can sell all of the components it produces for R360 each. The
Square Division needs 1 200 units. What is the correct transfer price per unit? (1)
29
c) Assume the Circle Division can sell 8 500 units at R260 each. Any excess capacity will be
unused unless the units are purchased by the Square Division, which could use up to 1 200
units.
i) Determine the minimum transfer price per unit that the Circle Division would be
willing to accept. (1)
ii) Determine the maximum transfer price per unit that the Square Division would
be willing to pay. (2)
d) Determine the target mark-up per unit as well as the target price per unit for the Hexagon
Division. (4)
e) Explain the three major limitations of cost-plus pricing. (3)
QUESTION 6
Bikes ‘R’ US Ltd manufactures mountain bikes and BMX bikes. The manufacturing of each type
of bike is managed under separate divisions. The company currently has two divisions, namely
the Mountain Bike Division and the BMX Bike Division. The managing board of directors of
Bikes ‘R’ US Ltd are concerned about the performance of the BMX Bike Division. Although the
board acknowledge that the division is profitable, their view is that the BMX Bike Division can
perform better, especially if the division increases its capacity.
The management accountant of the company made the following financial information available
for the BMX Bike Division:
70% capacity 80% capacity
Number of bicycles 7 650 8 743
Less:
Expenses R5 883 400 R6 413 208
Variable cost R1 958 400 R2 238 208
Semi-variable cost R2 125 000 R2 375 000
Fixed cost R1 800 000 R1 800 000
Net income R971 000 R1 411 777
Additional information
2. The company is a member of the bargaining council for bicycle manufacturers and as the
strike season is approaching, the biggest union, Bicycle Manufacturing SA (BMSA), has
declared their intention to strike. The strike may affect the sales of bicycles.
Required
a) Calculate the margin of safety ratio and explain its significance in relation to the intention by
BMSA. (13)
ANNEXURE C
COMPULSORY ASSIGNMENT 01/2015 – SECOND SEMESTER
YOU MUST COMPLETE THIS ASSIGNMENT IF YOU ARE REGISTERED FOR THE
SECOND SEMESTER.
THE MARK YOU EARN FOR COMPULSORY ASSIGNMENT 01 WILL CONTRIBUTE 25%
TOWARDS YOUR SEMESTER MARK, WHICH WEIGHS 20% IN THE CALCULATION OF
YOUR FINAL MARK.
Please remember to enter the correct unique number of the assignment on the mark-reading
sheet.
Wooden (Pty) Ltd is a manufacturer of wooden chairs. The company uses pine tree boards in
the manufacturing of these chairs. In order to meet the annual demand, the annual production
of the chairs requires 40 000 pine tree boards. The following information regarding these boards
is available:
Wooden (Pty) Ltd borrows funds at a 12% interest rate to finance inventories.
Lotters (Pty) Ltd, a supplier of wooden chairs and pine tree boards, has offered to sell pine tree
boards to Wooden (Pty) Ltd at a cost of R19 per pine tree board should the company place 40
orders per annum. If the special order is accepted, the holding cost per board will be equivalent
to the holding cost per board in the case of the economic order quantity (EOQ) inventory model
being applied. The only additional cost is warehouse costs that will amount to R300 per month.
The safety inventory level will be maintained throughout the year irrespective of which inventory
model is applied.
31
QUESTION 1
QUESTION 2
The total inventory holding cost of Wooden (Pty) Ltd, if the EOQ model is applied, is…
(1) R3 288,60.
(2) R6 685,20.
(3) R3 396,60.
(4) R1 887,00.
(5) None of the above options.
QUESTION 3
Assume that the holding cost is R5,40 per board per annum, if the special order is accepted.
This excludes the additional warehouse cost to be incurred because of the special order.
QUESTION 4
Assume that the holding cost is R5,40 per board per annum, if the special order is accepted.
This excludes the additional warehouse cost to be incurred because of the special order.
The total savings or total loss, if the special order is accepted, is…
32
MAC3701/101/3/2015
Edcor (Pty) Ltd (Edcor) is a retail group with interests in the clothing industry. Edcor operates an
absorption costing system, and costs other than the cost of goods sold are apportioned on an
arbitrary basis. Operating results for its three departments for the financial year ended
31 July 2015 are as follows:
Departments
Clothes Bags Bedding Total
R R R R
Sales 3 000 000 1 000 000 2 000 000 6 000 000
Less: Cost of sales 2 200 000 600 000 900 000 3 700 000
Less: Variable costs 20 000 30 000 40 000 90 000
Less: Other costs 330 000 150 000 120 000 600 000
Profit 450 000 220 000 940 000 1 610 000
A detailed analysis of "Other costs" shows that they are overhead costs consisting of:
R
Administrative costs 210 000
Material handling costs 180 000
Marketing costs 150 000
Building insurance costs 60 000
600 000
The following pairing of cost drivers to cost pools has been determined:
Activity Driver
Administrative costs Number of units sold
Material handling costs Number of orders received
Marketing costs Number of new customers
Building insurance costs Floor space
QUESTION 5
The total marketing cost allocated to the Bags department according to the activity-based
costing (ABC) method is…
33
QUESTION 6
The profit of the Bedding department according to the ABC method is…
QUESTION 7
The total overhead costs of the Bags department according to the ABC method are…
QUESTION 8
The total profit of the Clothes department according to the ABC method is…
A worker is able to make fewer mistakes and to complete a certain task in less time as he/she
gains experience in repeating the same task. It took a worker 30 hours to manufacture the first
unit and 24 hours to manufacture the second unit. The learning curve applies to the
manufacturing of the first 32 units by the worker.
QUESTION 9
34
MAC3701/101/3/2015
QUESTION 10
The cumulative average time per unit for the manufacturing of the first 16 units (rounded off to
two decimal places) is…
The following information must be used for purposes of answering questions 11 and
12.
Speedy Services Ltd is a local courier company specialising in deliveries in Gauteng. You have
been provided with the following information relating to the last six months:
Relevant formulae:
y = a + bx
Σy = an + bΣx
Σxy = aΣx + bΣx²
Hint
35
QUESTION 11
The value of the slope of the regression line (rounded off to two decimals) is…
(1) 13,89.
(2) 14,29.
(3) 8,71.
(4) 74,75.
(5) None of the above options.
QUESTION 12
The following information must be used for purposes of answering questions 13 to 16.
Additional information
1. Normal losses are estimated at 20% of the input that reaches the wastage point.
2. Losses occur when the process is 55% completed.
3. Material is added at the beginning of the process.
4. Conversion costs are incurred evenly throughout the process.
5. Ukuhlanza Liquid Ltd values its stock according to the first-in, first-out (FIFO) method.
36
MAC3701/101/3/2015
QUESTION 13
Determine the equivalent units in terms of material for Ukuhlanzi Liquid Ltd for the month of
September 2015.
(1) Long method: 80 000 units; short-cut method: 104 000 units
(2) Long method: 120 000 units; short-cut method: 96 000 units
(3) Long method: 104 000 units; short-cut method: 80 000 units
(4) Long method: 93 750 units; short-cut method: 80 550 units
(5) None of the above
QUESTION 14
Determine the equivalent cost per unit in terms of conversion for Ukuhlanzi Liquid Ltd for the
month of September 2015.
QUESTION 15
Determine the total rand value assigned to the abnormal loss units of Ukuhlanzi Liquid Ltd for
the month of September 2015.
Hint: You need to prepare the quantity statement, production cost statement (round amounts off
to 4 decimals) and cost allocation statement to obtain the correct answer. In your cost allocation
statement, only round off the final amounts to two decimals.
QUESTION 16
If losses occur at the end of the process and Ukuhlanza Liquid Ltd values stock according to
the weighted average method, determine the equivalent units in terms of material for
Ukuhlanzi Liquid Ltd for the month of September 2015.
37
The following information must be used for purposes of answering questions 17 to 20.
CD Limited operates a chemical process plant that produces four different products E, F, G and
H from the input of one type of raw material and water. Budgeted information for the
forthcoming financial year is as follows:
Joint costs
Raw material R250 000
Initial processing cost R394 000
The company policy is to apportion joint costs at the split-off point based on the net realisable
value (NRV) method. Currently, the intention is to sell product G without further processing but
to process the other three products further after the split-off point. However, it was proposed
that an alternative strategy would be to sell all four products at the split-off point without further
processing. If this were done, the selling prices per unit obtainable would be as follows:
QUESTIONS 17 TO 20
Round off the percentage of estimated (product NRV at split-off point)/(total NRV at split-off
point) to two decimals, for example xx,xx%, before allocating the joint cost based on this
percentage.
QUESTION 17
If the current intention is proceeded with and joint costs are apportioned using the NRV method,
the profit of product F is…
38
MAC3701/101/3/2015
QUESTION 18
If the current intention is proceeded with and joint costs are apportioned using the NRV method,
the total cost of production for product H is…
QUESTION 19
QUESTION 20
If the alternative strategy is used, the total cost for product G is…
39
ANNEXURE D
You must write and post this assignment or type and submit it as a PDF document online on
myUnisa. The lecturers prefer that you submit the assignment on myUnisa as postal
strikes cause unnecessary delays in the marking and sending back of assignments.
Please note that it is practice in our Department to mark selected sections of a written
assignment only. You can therefore not afford to leave out any questions as they might
form part of the selected questions for marking.
We will not inform you upfront which question(s), or parts thereof, we will select for
marking. Do not phone us to ask which questions will be marked. We will not tell you!
QUESTION 1
Aida (Pty) Ltd manufactures two products, namely Yippee and Hippie. The following
information is available for the year ended 30 June 2015:
40
MAC3701/101/3/2015
Budgeted statement of profit or loss and other comprehensive income of Aida (Pty) Ltd for the
year ended 30 June 2015:
Additional information
1. A detailed analysis of the overhead costs shows that they are made up of a portion of
overheads that are driven by the number of machine hours used and a portion of
overheads that are driven by labour hours. These overheads are fixed in nature. The
remaining overheads classified as "Other overheads" are variable costs that vary in line
with labour hours. The details are as follows:
Overhead cost R
Machine hour related 550 000
Labour hour related 649 950
Other overheads 200 000
Total 1 400 000
2. Aida (Pty) Ltd has a loan from PEP Bank of R3 200 000 that bears interest at 10% per
annum payable in advance.
Hint: Round activity rates off to three decimals. The activity rate can be calculated by
dividing the activity cost by the cost driver volume (for example, machine hours). Multiplying the
activity rate by the cost driver volume calculates the allocated amount.
Required
Prepare a budgeted statement of profit or loss and other comprehensive income of Aida (Pty)
Ltd for the year ended 30 June 2015, which is more useful for decision-making purposes and
shows the overheads per product type. Your statement should have columns for each product
type as well as a total column. Round all amounts off to the nearest cent. (12)
41
QUESTION 2
PART A
A company manufactures an industrial chemical, Idynamite, using two compounds Rap and
Zap. The standard materials usage and cost of one unit of Idynamite are as follows:
R
Rap 5 kg at R2 per kg 10
Zap 10 kg at R3 per kg 30
15 kg 40
In the period under review, 80 units of Idynamite were produced from 500 kg of Rap and 730 kg
of Zap.
Required
PART B
OK Limited sells two products, namely, product O and product K. The following details apply to
the two respective products for the 2015 financial year.
The actual contribution per unit of product O amounted to R4,20 and that of product K to R5,80,
while the standard contribution per unit is R4 per unit of product O and R6 per unit of product K.
Product O Product K
Budgeted data
Selling price per unit R10 R15
Sales volume (units) 10 000 10 000
Actual data
Total sales R110 400 R140 800
Units sold 9 200 8 800
Required
42
MAC3701/101/3/2015
QUESTION 3
Key Division, which forms part of Amper All Group, is considering an investment opportunity to
which the following estimated information relates:
1. Initial investment of R60 000 in machinery at the beginning of year 1, will be depreciated
on a straight-line basis over a three-year period with nil residual value at the end of the
three years.
The accountant of the Amper All Group has correctly estimated that the net present value
of the investment would be R3 839,22 using a cost of capital of 10%.
Hint: Use the asset value at the beginning of each year to calculate the cost of capital of the
investment.
Required
a) Calculate the residual income of the proposed investment for each of the three
years and comment briefly on the values obtained in reconciling the short-term
and long-term views. (11)
b) Discuss what steps can be taken to avoid dysfunctional behaviour which may be
motivated by this bonus scheme. (3)
QUESTION 4
Deer (Pty) Ltd (Deer) is a manufacturer of bamboo window blinds. MaKroo approached Deer to
manufacture 12 000 bamboo-type blinds once off to be delivered in three months’ time.
2. The company will appoint a specialist designer to assist with the design of the bamboo
blinds at a cost of R22 000.
3. The site supervisor will oversee the production of these blinds. In addition to his normal
monthly salary of R10 000 per month, the company will pay him a once-off incentive (or
43
“bonus”) of R3 000. While overseeing this project, the company will appoint a contractor
to execute the supervisor’s normal duties at a rate of R7 500 for the next three months.
4. Bamboo material will be required to manufacture these blinds. One bamboo blind
requires 1kg of this material. There is 8 000 kg of this material in inventory at present.
The company uses this material regularly in the manufacturing process. This material
was bought at a cost of R5 per kilogram. Currently, the bamboo material cost R4 per
kilogram.
5. Each bamboo blind requires four metres of steel which is screwed to the walls at a cost
of R0,50 per metre. There is currently no steel on hand. In addition to the steel
requirement, screws at a cost of R2 per screw are also required. Each bamboo blind
needs two screws. The company currently has 22 000 of this type of screws on hand.
The screws currently on hand have no other use.
6. Fixed manufacturing overheads amount to R110 000 per annum. This proposal will have
no impact on the total overheads of the company.
7. Specialised equipment is required for this proposal. The equipment will cost R20 000 and
will be sold for R12 000 at the end of the three months.
8. In order to meet the proposal, the company will have to rent container space at a cost of
R11 000 per month. The containers will be delivered to and from the site at a total cost of
R9 000. They will be insured at an additional cost of R3 000 per month.
9. A management fee of R30 000 is allocated to each production line on an arbitrary basis.
These costs will simply be allocated to another production line if the blinds are not
manufactured.
10. The company policy is to add a 20% mark-up on total relevant costs to arrive at a selling
price.
Required
Determine the price that Deer (Pty) Ltd should charge for the proposal. Give reasons for
inclusion and exclusion of amounts in your calculations. (25)
QUESTION 5
The Strings Division of Tennis Mania Ltd sells all of its output, 30 000 rolls of string per annum,
to the Racquets Division. The only product of the Strings Division is strings that the Racquets
Division uses in its tennis racquets. The retail price of the strings is R100 per roll. Cost data for
2015 of the Strings Division is as follows:
44
MAC3701/101/3/2015
The Grips Division is considering investing in a new product, called "Overgrips". The cost price
per unit for this product will be R40 and the annual demand for the new product will be 40 000
units. The new product requires an investment of R2 000 000 and the target divisional rate of
return on investment is 15%.
Required
a) Briefly describe in which context a transfer price based on marginal cost would be
appropriate. Describe any issues that may arise from such a transfer pricing policy. (4)
b) Calculate the transfer price per roll of string that the Strings Division would charge to the
Racquets Division using:
i) Market price (1)
ii) Variable product costs plus a fixed fee of 20% (4)
iii) Full cost plus 10% mark-up (4)
iv) Variable/Marginal cost (3)
c) Determine the target mark-up per unit for the Grips Division as well as the target price
per unit for this division. Round off all your figures to two decimals. (4)
QUESTION 6
Total sales revenue is currently generated by the two products in the following
proportion:
Product A 3 units
Product B 5 units
Required
a) Calculate the breakeven sales value per period based on the sales mix assumed above.
(7)
b) Calculate the required sales value to achieve net profit of R150 000 per year. (4)
45
ANNEXURE E
Important note: It is unlikely that you will get such a long question in the exam focusing on only
one topic, but the question is on an examinable standard and tests very important principles.
Feet Treat (Pty) Ltd. has an online shop. The online shop sells bath mats of two different sizes: small
(standard price R200 per mat) and regular (standard price R250 per mat).
Each mat consists of a non-slip rubber base and an upper part of soft fabric.
The company values inventory based on the standard absorption costing method. No finished goods or
raw materials inventory is kept, as the online shop uses a JIT system for purchases and production.
Fixed manufacturing overheads (budgeted at R896 100 for the month of July) are allocated to products
based on productive direct labour hours – the total normal capacity of the 55 factory workers is to work
8 700 productive hours per month.
46
MAC3701/101/3/2015
The actual sales for July consisted of 5 000 small mats at R180 each and 20 000 regular mats at R260
each. The small mats used 9 000 m2 of rubber and 10 000 m2 of soft fabric, whereas the regular mats
used 44 000 m2 of rubber and 52 000 m2 of soft fabric.
The standard is to allow 10% idle time, but actual idle time amounted to only 360 of the total of 9 000
hours actually clocked. The small mats used 1 296 of the productive hours actually worked. Labourers
were paid R84 per clock hour.
Actual variable manufacturing overheads amounted to R17,50 per small mat and R25 per regular mat.
Actual fixed manufacturing overheads were R915 840.
The management accountant has compiled the following incomplete and insufficient reconciliation of
budgeted and actual profit (the numbers, however, are correct where provided):
(F = Favourable; A = Adverse)
R
Budgeted profit (based on 24 000 total budgeted sales units in the 1 635 900
mix of small mats to regular mats 1:3)
Add/less: Unknown variance(s) ?
Standard profit 1 697 250
Add/less: ?
Material purchase price variance 80 000 (F)
Rubber 106 000 (A)
Soft fabric 186 000 (F)
Other material variances ?
Labour variances ?
Variable manufacturing overhead efficiency variance 0
Other (unknown) variances ?
REQUIRED
a. Calculate the actual price per m2 of rubber and per m2 of soft fabric. (4)
b. Redo the reconciliation of budgeted and actual profit showing all the individual
variances that are applicable in as much detail as possible to the extent that
information is provided in the question, as well as whether each of them is
favourable or adverse. You do not have to split the fixed overhead variances
between products. (42)
47
QUESTION 2 (25 marks; 30 minutes)
Travelfrenzy Ltd manufactures suitcases. The company values inventory based on the standard
absorption costing method. Materials are recorded at actual costs. There were no raw materials, work-
in-process or finished goods inventory at the beginning or end of 2014.
The following actual results are available for the 2014 year:
R
Material purchased 83 000kg 19 090 000
Direct labour 119 500 hours 12 350 000
Variable overheads (recovered based on units produced) 6 000 000
Fixed overheads 1 500 250
Additional information:
No. of
suitcases Probability
61 000 0,10
73 000 0,15
74 500 0,18
80 000 0,24
87 000 0,22
95 000 0,11
REQUIRED
(a) Calculate the actual breakeven sales volume in units for 2014. (5)
(b) Calculate the actual breakeven sales value for 2014. (1)
(c) Calculate the units to be sold to obtain a R2 000 000 profit for 2014. The
effect of taxation can be ignored. (2)
(d) Calculate the expected number of suitcases the new machine will manufacture
and advise management whether the new machine should be bought. (4)
(e) Explain the meaning of the terms standard deviation and coefficient of variation
as measures of risk (4)
48
MAC3701/101/3/2015
Multique (Pty) Ltd. sells two types of eye moisturisers: I-gel and I-creme. The following is an extract from
budget documents for the financial year ended 31 March 2015:
I-gel I-creme
Selling price per unit R120 R160
Total contribution R720 000 R1 000 000
Sales units 16 000 10 000
Direct fixed costs (avoidable) R240 000 R300 000
Common fixed costs amount to R225 400 and can be avoided if no I-gels and no I-cremes are sold.
REQUIRED
(a) Calculate the breakeven units for 2014 based on the standard product mix. (5)
(b) Calculate the breakeven sales value for 2014. (4)
[Drury adapted]
Summary financial statements are given below for one division of a large divisionalised company.
Summary divisional financial statements for the year ended 31 December 2014
Additional information:
• It is not the normal nature of this company to borrow/supply loans.The cost of capital for the
division is estimated at 12% per year.
• The respective divisions may not use their own discretion on how they borrow money. Head office
is responsible for financing decisions.
49
REQUIRED
a. Calculate the divisional Return on Investment (ROI) for the year ended
31 December 2014. (2)
b. Calculate the divisional Residual Income (RI) for the year ended 31 December 2014. (2)
c. State which method of performance evaluation (i.e. ROI or RI) would be more
useful when comparing divisional performance and why. (2)
d. Evaluate whether each of the following statements is true/false:
i. If head office expenses are allocated to the divisions based on gross income,
they should be excluded from the controllable profit calculation. (1)
ii. Employment equity statistics of the respective divisions should be ignored
when assessing the performance of the divisions. (1)
iii. Divisional profit contribution is the controllable profit, less any non-
controllable expenses that are attributable to a division, and which would
be avoidable if the division was closed. (1)
e. Explain the difference between managerial and economic performance and state
whether it includes controllable and/or non-controllable items, or not. (4)
[CIMA Adapted]
Return on investment: Only controllable operating profit and controllable operating assets/liabilities
should be taken into account in the calculation of ROI. Net operating profit is profit before interest and
taxes and is sometimes referred to as EBIT (earnings before interest and taxes).
Thus: depending on whether it is the normal nature of the company to borrow/supply loans, the interest
on these loans should be taken into account (if part of operational activities) or excluded from the
operating profit of the company.
Professional Processors (Pty) Ltd. uses a process costing system. The following information is available
regarding quantities for January 2014:
Units
Opening WIP – 1 Jan. 2014 (20% complete 25 000
with regard to conversion)
Put into production during January 2014 75 000
Completed and transferred 80 000
Closing WIP – 31 Jan. 2014 (70% complete 5 000
with regard to conversion)
The company uses the weighted average method of inventory valuation. Raw materials are added at the
beginning of the process. Conversion occurs evenly throughout the process.
50
MAC3701/101/3/2015
REQUIRED
(a) Prepare a quantity statement for January 2014 assuming that wastage occurs
when the process is 60% complete (use the short-cut method if the requirements
for its use are met). Normal losses amount to 4% of units that reach the wastage point. (6)
(b) Prepare a quantity statement for January 2014 assuming that wastage occurs
evenly throughout the process (use the short-cut method) and are detected at the
end of the process. Normal losses amount to 4% of units started in January 2014. (6)
ABC (Pty) Ltd is a medium sized manufacturer of plastic squeeze bottles in the Midrand area. The
management accountant of the company provided you with the following information for the financial
year ended 30 April 2014:
Note R
Sales 1 5 000 000
Dividends received 2 50 000
Cost of sales 3 2 000 000
Office equipment at cost 4 1 000 000
Machinery at cost 4 1 000 000
Additional information:
1. The company expects sales to increase by 8% for the coming financial year. Sales are spread evenly
throughout the year.
2. The company invested R100 000 in the shares of Assus Ltd on 1 May 2013. Assus declared dividends
on 31 March to all shareholders registered on 31 March 2014 and these dividends were payable on 30
June 2014.
3. The cost of sales is expected to increase by 5% per annum for the coming year. This takes into
account all changes in cost of sales, including the increase in sales. The purchases of raw materials are
made evenly throughout the year. No inventories of any kind is held.
4. Depreciation on office equipment is 20% per annum on the diminishing balance method and
depreciation on machinery is 20% per annum on straight line method. Both the equipment and
machinery were purchased on 1 May 2013.
5. To finance the acquisition of office equipment and machinery and the operating expenses for the first
six months the company borrowed R3 million from Abza Bank on 1 May 2013 at 8% simple interest per
annum. The interest is payable annually on 30 April. The capital is repayable in full on 30 April 2018.
6. For the financial year ended 30 April 2014, the company paid R16 000 per month on factory rental and
R12 000 per month on vehicles rental. These are expected to increase by 5% and 6% respectively from
1 May 2014.
7. For the financial year ended 30 April 2014, the company’s monthly salaries bill was R120 000. A
salary negotiation with the workers' union was settled at 6% for the forthcoming financial year.
8. Administrative expenses were R15 000 per month and will increase by 7% per annum from 1 May
2014.
9. A provision for income tax of R3 000 per month will be made for the forthcoming financial year.
51
REQUIRED:
Prepare the budgeted statement of profit or loss of ABC (Pty) Ltd for the six months ended 31 October
2014. State reasons for the omission of any items. (11)
Smart (Pty) Ltd is a distributor of scientific calculators amongst the other products it sells. The company
operates for 250 days per annum. The annual demand for the calculators is 10 000 units evenly spread
throughout the year. The company maintains a safety stock of 80 calculators.
Additional information:
REQUIRED:
Split (Pty) Ltd is a manufacturer of three products: Wing, Zing and Xeng. The same type of activities is
needed in the production process for production of the respective products. The budgeted production is
2 000 of Wing, 2 500 of Zing and 3 000 of Xeng. The selling price per unit is R55 for Wing, R70 for Zing
and R58 for Xeng. The variable cost per unit is R1,85 for Wing, R2,62 for Zing and R3,58 for Xeng.
The company uses activity based costing.
The total budgeted fixed manufacturing overheads are as follows for the budget period:
The above overhead items each represent an activity. Machine maintenance is required after a number
of operating hours.
52
MAC3701/101/3/2015
The analysis of the cost driver volumes for the budget period is as follows:
Cost driver volumes per product type Total
Cost driver Wing Zing Xeng
Machine setups 1 3 2 6
Machine hours 2 3 4 9
Indirect labour hours 3 4 6 13
Material movements 2 1 3 6
Number of orders 3 5 2 10
REQUIRED:
(a) Indicate the most appropriate cost driver for each of the activities. (2,5)
(b) Calculate the profit per unit of each product using the activity based costing approach. (11)
Tazz (Pty) Ltd is a civil engineering and construction company based in Centurion. The company is
considering tendering for a short term local municipality project to construct five small pedestrian
bridges. The chief engineer has approached you as the management accountant of the company
regarding this project with the following information:
1. Each bridge requires material A and material B. Material A is in stock and costs R10 000 per bridge.
Material B will have to be sourced at a cost of R12 000 per bridge. Both material A and material B are
regularly used by the company.
2. Each bridge requires 10 hours of type A and 6 hours of type B labour. Direct labour cost is R3 000 per
hour for labour type A and R1 000 for labour type B. Casual labourers will be employed for this for the
duration of the project. Due to staff shortages the company will also have to hire an architect at a cost of
R10 000 to do the drawings of bridges for this project.
3. Administrative expenses specifically for the project will be R10 000. General overheads of R8 000 will
be allocated to the project.
4. The company will have to hire additional machinery and equipment for the project at a cost of
R30 000. The company’s own machinery and equipment was bought last year at a cost of R3 million.
5. A competitor has tendered for this project at R115 000 per bridge.
6. The company use a cost plus pricing policy. Prices are set at total cost plus 10%.
REQUIRED:
(a) Calculate the selling price per bridge for the project and give reasons for any amounts excluded. (10)
(b) List two other factors that the chief engineer should consider before tendering for the project. (2)
© UNISA 2015. All rights reserved. No part of this document may be reproduced or transmitted in any form or by any
means without prior written permission of Unisa.
53