Question 1

Benjie and Brothers Pty (Ltd) (or the company) is a company that manufactures and supplies
a variety of plastic bags to a number of wholesalers and retailers in the country. The company
has been in operation for more than five decades and has corporate offices in the Isando
industrial area, Ekurhuleni Metropolitan, Gauteng province. It also has distribution warehouses
in Isando, Roodepoort, Pretoria, Durban, Bloemfontein, Mbombela and Port Elizabeth.
Assume you are a newly appointed CA trainee accountant in this company and you have just

Your
s provided you
with the following information for the three-month period

Raw material inventory:

- Balance at 1 April 2018, R3 500; purchases during the period, R5 500; and balance at
30 June 2018, R2 300.
Transportation cost
- Material for the period, R1 300.
- Fuel and other transport costs, R2 000
Other costs:
- Rental: factory premises, R2 300; site and office R2 200.
- Insurance: factory, R800; motor vehicle, R1 200; administration buildings, R550.
- Salaries and wages: direct wages, R4 500, salaries and wages of factory staff is
R2 500; salary of factory supervisors R6 000; and salaries and wages of administration
staff and supervisors, R6 500.
- Selling and administration expenses, R3 500.
Details of other semi-variable costs. Variable costs are factory related and the remainder
are fixed administration.
Month Activity levels Cost (R)
April 2018 4 500 9 000
May 2018 3 150 6 850
June 2018 3 800 7 550

Finished goods inventory:

- Balance at 1 April 2018, R8 500; defects, R400; and balance at 30 June 2018, R2 200.

REQUIRED MARKS
a) Prepare costing statement or schedule from the above information
showing clearly the following sections:
i). Total direct material.
ii). Prime costs.
iii). Manufacturing overheads.
Vi). Total costs 12
b) Distinguish between the following paired costing terms and comment
on their accounting treatment:
i). Period cost and product cost. 4 marks
TOTAL MARKS 16

1
QUESTION 2 (15 marks)

Mrs Johnston owns a factory where they produce candy. At the beginning of this year she
entered into an agreement with Lets-Lease-It Pty(Ltd) wherein she leased a manufacturing
machine for 5 years with the lease payments being fixed at R5 000 per annum. She also made
a non-refundable initial payment of R 5 000, which will be forfeited if she cancels the lease.
The following are details of some of the costs that were incurred during the current year:

Indirect material R 50 000

Rent R 60 000
Maintenance and repairs (Note) R 32 500

Note: These costs relate to an activity level of 50 000 machine hours. It is expected that the
maintenance and repairs costs will increase to R41 250 if the machines hours increase to 75
000 hours.

REQUIRED Marks
(a) Classify each of the cost above as either fixed cost, sunk cost, variable (7)
cost and mixed costs
*for mixed costs, if any, make a split between fixed and variable.

(b) Identify from the costs above which costs will be relevant for short term (3)
decision making.

c) Distinguish between Management and Financial Accounting (5)

TOTAL MARKS (15)