Calculate the total variable cost per packet of chips and fixed cost

Total Variable Cost Per Packet

Potatoes 2.52 [1/2]

Flavoring 1.5 [1/2]
Patent 0.9 [1]
Electricity 0.1 [1/2]P
Diesel 6.48 [1]
11.5

High & Low

4400 4000 [1/2]

5000 10000
600 6000 [1]P
Price per pack 0.1 [1]P

Fixed Cost 4000 [1]P

Classify the costs above by function

Potatoes Manufacturing [1/2]

Cleaning costs Manufacturing [1/2]
Patent Fee Manufacturing [1/2]
Electricity Usage Manufacturing [1/2]
Diesel Manufacturing [1/2]
Salaries & Wages: Admin Non-Manufacturing [1/2]
Salaries & Wages: Production Manufacturing [1/2]
Transportation Non-Manufacturing [1/2]

Taking into account assumptions of CVP, discuss how the behaviorial nature of diesel as cost will impa

CVP assumes that all variable costs remain constant [1], and only applies within the relevant range
Therefore, where the price of diesel changes then the variable will fall outside the relevant range

Using relevant costs principles, advice whether the order from Little Starts Charity Organisation should

Selling Price 24,000.00

Variable costs - 23,000.00
Patent 1,800.00
Packaging 3,000.00
Packaging - 1,500.00
Deposit Refundable [1] -
Machinery - 300.00
Catering Sunk [1] -
Opportunity cost (R15-R11,5) [1] - 875.00
Delivery costs 850.00
 3,975.00

The order has a positive contribution of R3 125 and therefore should be accepted. [1]

Discuss other qualitative factors that should be considered before accepting the order

Impact of the sacrified units on customer loyalty

Financial capacity of the customer
Creditworthiness of the customer
Reliability of the supplier and whether the material will be delivered on time
Reliability of the transport including who carries the risk when the stock is in transit
Safety measures and control to manage food contamination risk
Possibility of a similar order recurring
Any other valid factor
 Fixed Costs

Cleaning 36,000 [1]

Electricity 48,000 [1]
Salaries & Wages 500,000 [1]
584,000

ture of diesel as cost will impact CVP analysis.

n the relevant range [1] .Diesel price fluctuates based on economic conditions [1],
he relevant range [1], and therefore the analysis may not be relevant [1]

s Charity Organisation should be accepted.

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ng the order

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Identify and discuss two indirect costs from the production costs of T-Slarr (Pty) Ltd.

Indirect costs cannot be directly traced to a cost object [1] It is not possible to identify the costs below with a specific

Any of the three below

Salary of a production manager [1]
Water and electricity [1]
Interest on loan [1]
Fixed manufacturing costs [1]
Fixed administrative costs [1]

Maximum 5

Discuss how the indirect costs above will be included in the total cost per vehicle

Indirect costs are included in the product cost through an absorption rate or two step allocation process
Cost drivers are identified with overheads and used to determine departmental rates, which are then used to allocat

Calculate the over/under absorbed amount of fixed manufacturing overheads.

Absorption rate 15000000/400

37,500.00 [1]

Production Units
Opening 20 [1]
Production 490 [1]P
Less Closing -10 [1]
Sold 500 [1]

Absorbed fixed costs 18,375,000.00 [1]P

Other actual manufacturing co 15,500,000.00 [1]
Salaries 900,000.00 [1]
Water and electricity 600,000.00 [1]
Over absorption 1,375,000.00 [1]P

Prepare the statement of profit or loss applying absorption costing method

Revenue 350,000,000 [1]

Cost of Sales 94,998,500

Opening Stock 20 Units 3,799,940 [1]P

Cost 189,997
Variable cost 112,497 [1]
Other variable cost 40,000 [1]
Absorbed fixed cost 37,500 [1]P

Production cost 490 units 93,098,530 [1]P

Closing stock 10 units - 1,899,970 [1]P

Over absorption [1]P 1,375,000

Gross Profit 255,001,500 [1]P

Interest on loan - 1,000,000 [1]

Other fixed administrative costs - 650,000 [1]
Royalty fees - 17,500,000 [1]

Net Profit 254,726,500

Calculate average number of vehicles that should be sold in order to break even annually

Selling Price 700,000.00 [1]

Variable costs 424,997.00

Autopilot components 112,497.00 [1]

Other variable costs 40,000.00 [1]
Direct Material 250,000.00
Royalty fees 22,500.00 [1]

Contribution 275,003.00

Fixed costs 18,650,000.00

Other actual manufacturing co 15,500,000.00 [1]

Salaries 900,000.00 [1]
Water and electricity 600,000.00 [1]
Interest on loan 1,000,000.00 [1]
Other fixed administrative exp 650,000.00 [1]

Break even point 68 [1]P

r (Pty) Ltd.

he costs below with a specific cost object [1]

location process [1]

hich are then used to allocate overheads to products [1]
k even annually