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FACULTY Faculty of Economics and Management Sciences

DEPARTMENT Accounting, Auditing and Income Tax

SUBJECT Management Accounting 2A


DATE June,2016

DURATION 3 hours MARKS 100

June Regular Examination

Examiner: Mr. FM KapePiso

Moderator: Mr. PP Swartz

This question paper consists of: 5 pages including this cover page and 4 questions in total

o Answer all questions.
o Start each question on a neht page
o Show all your workings clearly wherever required
NB: Graph paper to be provided


Question 1: (30 marks)

Part A:

ABC Ltd has developed a new product which is about to be launched on to the market. The variable
cost of selling the product is $12 per unit. The marketing department has estimated that at a sales
price of $20, annual demand would be 10,000 units.
However, if the sales price is set above $20, sales demand would fall by 500 units foreach 0.50
cent increase above $20. Similarly, if the price is set below $20, demand would increase by 500
units for each 0.50 cent reduction in price below $20.
l.l. (a). Determine and calculate the price which would maximise ABC Ltd.'s profit in the
next year. Assume sales demand would fall and increase three times. (10 marks)

1.2.(a). If fixed costs are $150 000 and the required profit is $100 000. Calculate the
required sales price per unit. (5 marks)

Part B:

XYZLtdhas been approached by a customer who would like a specialjob to be done for him, and
who is willing to pay $22 000 for it. The job would require the following materials.

Material Total units Units Book value Realisable Replacement

required already in of units in value per cost per unit
stock stock per unit
A I 000 0 6
B 1 000 600 2 2.50 5
C 1 000 700 J 2.50 4
D 200 200 4 6.00 9

Material B is used regularly by XYZ and if units of B are required for this job, they would need to
be replaced to meet other production demand.

Material C and D are in stock as the result of previous over-buying, and they have a restricted use.
No other use could be found for material C, but the units of material D could be used in another
job as substitute for 300 units of material E, which currently costs $5 per unit (of which the
company has no units in stock at the moment).

1.1. (b). Calculate relevant costs of material for deciding whether or not to accept the contract.
(10 marks)
Question 2: (30 marks)

A company owns three factories with the following production capacity in respect of particular

FactorY CaPacity
A (in Windhoek) 800 units
B (in Walvis Bay) 1000 units
C (in Oshakati) 1200 units

The marketing areas with their various demands are as follows:

Market area Demand

1 (Katima Mulilo) 600
2 (Rundu) 800
3 (Swakopmund) 600
4 (Otavi) 1000

The transport cost (in N$) per unit is as follows:

From A B C
I 2 l0 t2
2 8 t2 t4
J 10 4 t6
4 4 2 6


2.1. Draw up a plan according to which the product should be distributed if cost effectiveness
is the most important objective. (2 marks)

2.Z.Findan initial solution by applying the northwest corner method. (8 marks)

2.3. Determine the minimum transport cost with the aid of the Vogel's approximation method?
(20 marks)
Question 3z Q5 marks)
available in three models, namely the
Gl0' the
XyZ Limited manufactures calcurators which are
restricted bv the available labour
frffi|"1rff?jf"}f,,||: in two departments whose capacities are
while 1' 2 million
t u, t, + million labour hours available'
hours. The manufacturing department
labour hours are available in the assembly
The production times are as follows:
Manufacturing dept' 4ssgmblv
0.5 hours
0.5 hours
G10 model 0.5 hours
C.5 hours
G8 model 2.0 hours
.0 hours
GTS10 model

for the following year are as follows:

The estimated demand and contribution

G10 model (X )
750 $1300
G8 model (X )
400 $2500
GTS10 model (Xr)


model to solve the problem bY means of the simPlex
3.1. Formulate a linear programming
method (6 marks)

(9 marks)
3.2. Compile the first simplex tableau

(1 marks)
3.3. Indicate the first key column and
key row of the first simplex tableau?
(you are not required to determine the key
3.4. Compile the second simplex tableau
and keY row) (9 marks)
Question 4: Q0 marks)

Broekskeur Limited has had a hard time for the last couple
of years in the la1fet in which they
a new factory should be built and how big the
operate. The management must now decide whether
company should first carry out market
factory should be. The managing director suggests that the
be produced'
research on the success or otherwise of the product to

The following information is available:

favorable selling conditions

unfavorable selling conditions

realize a profit of $300 000, while

A large factory with favorable selling conditions is estimated to
In addition, it is estimated
it will make a loss of $200 000 under unfavorable selling conditions.
conditions are favorable and a loss of
that a small factory will make a profit of $200 000 if selling
The cosiof carrying out market research will
$120 000 under unfavorable selling conditions.
amount to $10 000 and is not taken into account in the
calculation of the profit or loss'

i.i. Draw up a decision tree to highlight clearly the choice of the company' (20 marks)

The end of question Paper