ZQMS-ARC-REC-002

ASSIGNMENT COVER

REGION: MATABELELAND NORTH SEMESTER: YEAR: 2024

PROGRAMME: BACHELOR OF COMMERCE IN ACCOUNTING HONOURS

INTAK E:

FULL NAME OF STUDEN T: KUDZI PIN: P

EMAIL ADDRESS:

CONTACT TELEPHONE/CELL: 077 ID. NO.: -

COURSE NAME: MANAGEMENT AND COST ACCOUNTING COURSE

CODE: BACC309

ASSIGNMENT NO.: 1 STUDENT’S SIGNATURE

DUE DATE: 8 APRIL 2024 SUBMISSION DATE: 9 APRIL 2024

ASSIGNMENT TITLE: Q1,Q2,Q3

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Question1.
a). Martinelli Limited is a small manufacturing company
Calculate an appropriate absorption rate and comment on the: (i) the assembling
department; and (ii) the finishing department. (20 marks)

COST DEPARTMENTS

ASSEMBLING FINISHING ADMINISTRATION STORES WORKS

STUDY
$ $ $ $ $
Allocated costs 25 000 9 000 70 000 8 000 18 000
Stores *4800 3200 - (8 000) -
apportionment
Administration *25 000 40 000 (70 000 ) 2 000 3 000
apportionment
54 800 52 200 0 2 000 21000
Work study 14 000 *7 000 - - (21 000 )
apportionment
68 800 59 200 0 2 000 0
Stores 1 200 800 0 (2 000) 0
apportionment
TOTAL 70 000 60 000 - - -

Machine Hours 35 000

Labour Hours 60 000

$ 70 000 = =
35 000 machine hours
=$2 per machine =$1 per
$ 60 000 hrs labour hs
60 000 labour hrs
Overhead
Absorption Rates
Working Base used to Apportion

Stores apportionment Number of requisitions received

Work study apportionment Hours worked

Administration apportionment Number of employees

Stores apportionment=15/25 x$8000= *$4800

Administration apportionment =25/70 x$70 000 =*$25 000

Work study apportionment =1/3 x$21 000 = $7 000

The method used to allocate indirect overhead is the repeated/ continuous allotment overhead
method until all the service department costs are spread over to production departments remaining
with nil service costs on service department at the end.

(b) Calculate the total factory cost of the special MEA 6 pump (5 marks)

Quotation for Job MEA 6

$ $
Total Direct Costs 100
Overheads Costs
Assembling(Machine hrs x OAR) = 10hrs x $2 20
Finishing (Labour hrs x OAR ) = 15 labour hrs x $1 15
35
TOTAL COST 135.00
Question 2. Amiron Limited manufacturer
Required: As far as the information permits, prepare all the relevant budgets for Amiron
Limited for the year to 31 March 2005.
(25 marks
(i).Budgeted Sales (units and value)
Product Units Price($) Value ($)
EC2 1000 100 100 000

(ii).Budgeted Production (units )

EC2
Product Units
Budgeted Sales units 1 000
Add:Closing stock (110% of opening stock)=110%x800units 880
1880
Less :Opening stock (800)
Budgeted Production 1080

(iii).Material Usage Budget (units )

Material Type E C
Units Units
Usage Raw material 5 10
iv).Material Purchase Budget (units and value)
E C
Units Units
Usage Raw material 5 10
Add:Closing stock 110% of opening stock (x$4500) 4950
110% of opening stock($12000) - 13200
4955 13210
Less:Opening stock (4500) (12 000)
455 1210
x $3 X$4
$1365 $4840

(vi).Labour Cost Budget

EC2
Department $
Machining (1hr x$6 x1000units) 6000
Assembling (0.5hrs x$8 x1000 units) 500
6 500

Production Overhead Budget

$
Finished production 100 000

Production Cost Budget

$
Material Usage(5unitsx$3)+(10unitsx$4) 55
Production Overhead cost budget 100 000
Labour cost budget 6500
Production Cost Budget 106 555
Cost of Sales Budget
$
Opening stock of finished goods 52000
Add:Production cost 106 555
158 555
Less :Budgeted Closing stock (67650)
Budgeted Cost of Sales 90905

Budgeted Income Statement

$ $
Sales 100 000
Less :Cost of sales (90905)
Gross Profit 9095
Less:Operating Costs
Admin,selling and distribution overheads 150 000
Depreciation Fixed assets 20%xcost($250000) 25 000
(175 000)
Budgeted Net Profit/(Loss) 165905

Finished Goods Budget

$
Opening stock (800units x$65/unit) 52 000
Closing stock (110%x $52000) 57200

Closing Stock Budget

Product units Cost($) Value($)
E 4950 3 14 850
C 13200 4 52 800
 67 650

Closing Trade debtors :Calculation

$
Opening debtors 80 000
Closing debtors (15%x Sales $100 000) 15 000

Cash received from debtors =opening debtors +credit sales –closing debtors
= 80 000 +100 000 - 15 000
Cash received from debtors = $165 000

Closing Trade Creditors :Calculation

$
Opening creditors 28 000
Closing creditors (10%x Purchases $6205) 621

Cash received paid to creditors =opening debtors +credit purchases –closing creditors
= 28 000 +6205 - 621
Cash paid to suppliers = $33 584
 Amiron Ltd
Budgeted Balance Sheet as at 31 March 2005
NON CURRENT ASSETS AT COST ACCUM DEPRECIATION NET BOOK VALUE
Fixed Assets 250 000 (100 000+25000) 125 000

CURRENT ASSETS
Stock :Finished Goods 57 200
Stock :Raw material 67650
Trade Debtors 15000
Cash [2000 +165000- 83 416
33584-50000]
223 266
CAPITAL EMPLOYED 348 266

EQUITY &LIABILITIES
Ordinary Share Capital 225 000
Retained earnings [17500- (148405)
165905]
Owners Equity 76 595

CURRENT LIABILITIES
Trade creditors 621
Expenditure owing 196050
Proposed dividend 75000
271 671
CAPITAL EMPLOYED 348266
 Question 3 .Majata Ltd –CVP Analysis

For each proposal calculate: (i) the break-even position in units in value terms; (10marks)

(i).When there is a reduction in selling price by 10%

Selling price per unit =$100 000/10 000units =$10
Proposed selling price = 90% x$10 = $9
Details New Proposal reduction in Selling Price Budgeted Variance
10000 units 10 000 units 10 000units
$/unit $/unit $/unit
Selling Price /unit 9.00 10.00 (1.00)
Less :Variable Cost/unit (8.00) (8.00) 0.00
Contribution per unit 1.00 2.00 (1.00)
Fixed cost per unit (3.00) (3.00) 0.00
Profit /(loss) (2.00) (1.00) (1.00)
$ 30 000 $ 30 000 = =30000 units = =15 000units 15000 units
$ 1 per unit $ 2 per unit
BEP (UNITS)
BEP (SALES$) = 30 000 units x$9 =$270 000 =15 000units x$10 =$150 000 $120 000

2. Increase in Selling price by 10%

Proposed Increase in Selling Price = $10 x110%/100% = $11
Details New Proposal Increase in Selling Price Budgeted Variance
10000 units 10 000 units 10 000units
$/unit $/unit $/unit
Selling Price /unit 11.00 10.00 (1.00)
Less :Variable Cost/unit (8.00) (8.00) 0.00
Contribution per unit 3.00 2.00 (1.00)
Fixed cost per unit (3.00) (3.00) 0.00
Profit /(loss) (0.00) (1.00)
$ 30 000 $ 30 000 = =10000 units = =15 000units -5000 units
$ 3 per unit $ 2 per unit
BEP (UNITS)
BEP (SALES$) = 10 000 units x$11 =$110 000 =15 000units x$10 =$150 000 -$40 000

3.Increase in variable cost by $1.50

New proposal increase in Variable cost = $1.50+$8 =$9.50
Details New Proposal Increase in Variable cost Budgeted Variance
by $1.50
10000 units 10 000 units 10 000units
$/unit $/unit $/unit
Selling Price /unit 10.00 10.00 (1.00)
Less :Variable Cost/unit (9.50) (8.00) 0.00
Contribution per unit 0.50 2.00 (1.50)
Fixed cost per unit (3.00) (3.00) 0.00
Profit /(loss) (2.50) (1.00) (1.50)
$ 30 000 = =60000 units = =15 000units 45 000 units
$ 0.50 per unit
$ 30 000
BEP
$ 2 per unit
(UNITS)
BEP (SALES$) = 60 000 units x$10 =$600 000 =15 000units x$10 =$150 000 $450 000

(ii) The number of units required to be sold in order to meet the profit target. 5 marks)

¿ COST +TARGET PROFIT

Number of units required to achieve target profit =
CONTRIBUTION PER UNIT

1.When there is a reduction in selling price by 10%

¿ COST +TARGET PROFIT

Number of units required to achieve target profit =
CONTRIBUTION PER UNIT
 $ 30 000+($ 20 000)
=
$1
$ 10 000
=
$1
= 10 000 units

2. Increase in Selling price by 10%

¿ COST +TARGET PROFIT

Number of units required to achieve target profit =
CONTRIBUTION PER UNIT
$ 30 000+($ 0 000)
=
$3
$ 30 000
=
$3
= 10 000 units

3.Increase in variable cost by $1.50

¿ COST +TARGET PROFIT

Number of units required to achieve target profit =
CONTRIBUTION PER UNIT
$ 30 000+($ 25 000)
=
$ 0.50
$ 5 000
=
$ 0.50
= 10 000 units

(b) State which proposal you think should be adopted. (10marks)

Comparison of contribution on each proposal will give us a clear picture of which option to adopt.

1.When there is a reduction in selling price by 10%

 Budgeted Proposed Reduction in Marginal
Selling Price Increase/(decrease)
Contribution $20 000 $10 000 ($10 000)

2. Increase in Selling price by 10%

Budgeted Proposed Increase in Marginal
Selling Price Increase/(decrease)
Contribution $20 000 $30 000 $10 000

3.Increase in variable cost by $1.50

Budgeted Proposed Increase in Marginal
Variable Cost by $1.50 Increase/(decrease)
Contribution $20 000 $5 000 ($25 000)

Option 2. Increase in Selling price by 10% -when there is an increase in selling price the marginal
contribution is $10 000 which is positive and its able to cover all other fixed costs and enable Majata Ltd
company to break even.
REFERENCES
1.Arora, M.N. (2009). Cost and Management Accounting, Theory, Problems, and
Solutions, Mumbai: Global Media.
2.Avis, J., Burke, L. and Wilks, C. (2009). Management Accounting-Decision
Management. London: CIMA Publishing, 2008.
3.CIMA (2007). Managerial Paper P2: Management Accounting-Decision
Management. London: BPP learning Media.
4.Drucker, P. (1993). The Five Deadly Business Sins. The Wall Street Journal, p.A22.
5.Drury, C. (2000). Management and Cost Accounting. New York: International
Thomson Business Press.
6.Hansen, D.R. and Mowen, M.M. (2000). Management Accounting (5th edition).
Cincinnati: South Western College Publishing.