Case Study

PROGRAMME Bachelor of Commerce in Accounting

MODULE Management Accounting and Finance 2A
YEAR Two (2) Semester 1
INTAKE January 2023
TOTAL MARKS 30
SECTION A [30 Marks]

Answer ALL the questions in this section.

QUESTION 1

The information provided below represents the budgeted production and sales data of product X for the forthcoming
quarter at Alpha-Beta Inc.

INFORMATION

Planned sales volume 20 000 units

Sales R1 600 000

Direct materials cost R500 000

Direct labour cost R400 000

Variable manufacturing overhead cost R100 000

Fixed manufacturing overhead cost R200 000

Fixed administration and marketing cost R100 000

Variable administration and marketing cost R100 000

Use it to answer each of the following questions independently:

1.1 Calculate the contribution margin per unit. (3 marks)

1.2 Calculate the break-even quantity. (4 marks)

1.3 Calculate the margin of safety (as a percentage) and explain the value obtained. (4 marks)

1.4 Calculate the selling price per unit that will enable Alpha-Beta Inc. to break even if 16 000 units are (4 marks)
sold.

QUESTION 2

Study the information provided below and answer the following questions.

Stevmark Limited manufactures precision tools to its customers’ own specifications. The manufacturing operations are
divided into three cost centres: A, B and C. An extract from the company’s budget for the forthcoming period shows the
following data:

Cost centre Budgeted production overhead, R Basis of production overhead absorption, R

A 385 000 22 000 machine hours

B 750 880 19 760 machine hours

C 409 640 41 800 labour hours

Job AX1 was manufactured during the period and its job cost sheet reveals the following information relating to the job:

Direct material requisitioned R67 801

Direct material returned to store R396.00

Direct labour recorded against job AX1:

Cost centre A 146 hours at R48.00 per hour

Cost centre B 39 hours at R57.00 per hour

Cost centre C 279 hours at R61.00 per hour

A special machine was hired for job AX1 at a cost of R590.00.

Machine hours recorded against job AX1:

Cost centre A 411 hours

Cost centre B 657 hours

Price quoted and charged to customers, including delivery R172 000.

Stevmark Limited absorbs non-production overhead using the following pre-determined overhead absorption rates:

Administration and general overhead 10% of production costs

Selling and distribution overhead 12% of selling price

REQUIRED:

2.1 Calculate the predetermined overhead absorption rate for each of the cost centres, using the basis (3 marks)
indicated.

2.2 Present an analysis of the total cost and profit or loss attributable to job AX1. (12 marks)