Identify if the statement is TRUE OR FLSE. Put XX on the column provided.

True
False
14. Advertising Cost
Product cost

15. Factory supplies

Product cost

16. Office supplies

Period cost

17. Lubricants used for machines

Period cost

18. Property taxes of factory building

Product cost

19. Depreciation of executive cars

Product cost

20. Insurance of finished goods warehouse

Product cost

21. Billing costs

Period cost

22. Depreciation of delivery equipment

Period cost

23. Salesmen Commission

Product cost

24. Depreciation of factory machine

Factory overhead

25. Salary of Assembly supervisor

Direct labour

26. Wages of factory janitor

 Direct labour

27. Factory utilities expenses

Direct Materials

28. Wages of assembly line workers

Direct labour

29. FOH costs that that do not change

within the relevant range, regardless of
the changes in production activity
Fixed overhead

30. It is a system that accumulate factory

overhead cost base on a predetermined
overhead rate
Normal costing

31. Indirect labour

Variable

32. Factory costs incurred that cannot be

directly identified with the manufacturing
process
Factory overhead

33. Example of fixed factory overhead

Depreciation of office equipment

University of Fort Hare

Together in Excellence

NKUHLU DEPARTMENT OF ACCOUNTING

FINANCIAL MANAGEMENT 2B
AFM 221E
______________________________________________________________________
 TEST 2

23 September 2022

ASSESSOR: Mr SM Msakatya
MODERATOR: Mrs D Emslie
TIME: One Hour

QUESTION TOPICS COVERED MARKS

1 Process costing 25

2 Joint and by-product costing 25

TOTAL 50
Question 1 (25 Marks)

Best Chocolates (Pty) Ltd manufacture chocolates. The management accountant of Best
Chocolates (Pty) Ltd’s is on maternity leave from the beginning of August 2022, and you have been
asked to step in and help with the preparation of the process costing reports for the month of August
2022.
The final processing of the chocolates occurs in the Packaging Department. A shiny wrap is applied
when the chocolates are 20% complete. A printed package with chocolate name and the
company’s name and logo, is added when units are 60% through the process. Conversion costs
consisting of direct labour and applied overhead, occur evenly throughout the packaging process.
The following data relates to the activities of the Packaging Department during the month of August
2022:
- Opening work-in-progress inventory of 21 000 units, 40% complete as to conversion.

- Opening costs were as follows:

o Chocolates transferred R80 000
o Shiny wrap R32 000
o Direct labour R65 000
o Overheads (30% of direct labour Rand)

- 48 000 units were transferred in to the Packaging Department during August 2022. The
costs transferred in from prior processing were R3,85 per unit

- There were 10 000 units in closing work-in-progress, 80% complete as to conversion.

- The Packaging Department’s August 2022 costs were as follows:

o Shiny wrap R70 000
o A printed package with chocolate name, company’s name and logo R50 000
o Direct labour R140 000
o Applied overhead (30% of direct labour Rand)

- There were 59 000 units that were completed and sold in August 2022.

- Best Chocolates (Pty) Ltd uses the FIFO method for inventory valuation purposes.

YOU ARE REQUIRED TO:

(a) Prepare a schedule showing the actual equivalent units processed by Best 8
Chocolates (Pty) Ltd’s Packaging Department for the month of August 2022
(b) Prepare the equivalent unit cost statement 7

(c) Assuming the company was using weighted average, prepare the equivalent 5
units statement for the month of August 2022
(c) Briefly explain how your calculations would be affected if Best Chocolates (Pty) 5
Ltd used the weighted average method of valuing inventory instead of the FIFO
method. Your answer is to include an explanation of how the inventory systems
differ in terms of their impact on inventory valuation when using a process
costing system.
Total marks 25
Question 2 (25 Marks)
Delicious Cheese Ltd manufactures three joint products (Cheddar cheese, Gouda cheese and
Mozzarella) in one process. All products can be sold at split-off point or can be further processed
separately after the split-off point.

The data given below relates to August 2022:

Cheddar Gouda Mozzarella

Selling price at split-off point (per kg unit) R 50 R 54 R 65
Selling price after further processing (per kg unit) R 62 R 68 R 78
Further processing cost R 170,000 R 145,000 R 180,000
Output at split-off point (in units) 16,000 14,800 13,300

The costs incurred up to the split-off point include the following:

Direct labour: R285 000

Direct material: R268 000

Production overheads are absorbed at 45% of direct labour cost.

REQUIRED:

(a Allocate the joint costs for the three products using the following methods:
) i. Constant gross profit percentage.(Ignore the effects of rounding) 17

(b Advise management of Delicious Cheese Ltd on which products should be further 8

) processed and which ones should not.

Total 25