MANAGEMENT ACCOUNTING III (MODULE 1) SPECIAL EXAM 2023

Question: 1 (30 marks)

Calculation of Production Variances

(1) Material - Price Variance Material - Quantity Variance

= ( AQ x AP) - (AQ x SP) = (AQ x SP) - (SQ X SP)

= 26000 - (4900 x5) = (4900 x 5) - (1250 x 4 x 5)

= 1,500 unfavourable √ ½ = 500 favourable √½

(2) Labour Rate Labour Efficiency

= (AH x AR) - (AH x SR) = (AH x SR) - (SH x SR)

= 5000 - (1200 x 4) = (1200 x 4) - (1180 x 1 x 4)

80 unfavourable
= 200 unfavourable √½ = √½

(3) Variable Overhead Rate / Spending Variable Overhead Efficiency

= (AH x AR) - (AH X SR) = (AH x SR) - (SH x SR)

= 3750 - (1200 x 3) = (1200 x 3) - (1180 x 1 x 3)

60 unfavourable
= 150 unfavourable √½ = √½

Examiner: Moderator:
 MANAGEMENT ACCOUNTING III (MODULE 1) SPECIAL EXAM 2023

('4) Fixed overhead Budget Fixed overhead Volume

= (AH x AR) - Budget = Budget - (SH x SR)

= 2450 - (1250 x 2) = (1250 x 2) - ( 1180 x 1 x 2)

140
= 50 favourable√½ = unfavourable√½

Calculation of Sales Variances

(5) Price Variance Volume Variance

= (AP - SP) x AQ = (AQ - SQ) x Std Profit

= (37 - 36) x 1050 = (1050 - 1000) x (36 - 29)

= 1,050 favourable √½ = 350 favourable √½

Calculation of Actual Operating Profit

Production Costs R
Materials 26,000½
Direct Labour 5,000½
Variable O/heads 3,750½
Fixed O/heads 2,450½
37,200

Examiner: Moderator:
 MANAGEMENT ACCOUNTING III (MODULE 1) SPECIAL EXAM 2023

Add:WIP - Opening Stock 2,450

Materials 100 x 1x 4 x 5 2,000 ½
Direct Labour 100 x 0.5 x 1 x 4 200 ½
Variable o/heads 100 x 0.5 x 1 x 3 150 ½
Fixed O/heads 100 x 0.5 x 1 x 2 100 ½

Less:WIP - Closing Stock 4,720

Materials 200 x 1x 4 x 5 4,000 ½
Direct Labour 200 x 0.4 x 1 x 4 320 ½
Variable o/heads 200 x 0.4 x 1 x 3 240 ½
Fixed O/heads 200 x 0.4 x 1 x 2 160 ½

Cost of Sales 34,930√

Income Statement

Sales ( 1050 x 37) 38,850√

Less:Cosf of Sales
32,030√
Opening FG (300 x 29) 8,700
Add Cost of Manufacture 34,930
Less:Closing FG (400 x 29) 11,600

Actual Operating Income 6,820√

Reconciliation of Budgeted Income to Actual Income

Budgeted Operating Income (1000 * (36-29 = 7) 7,000√

Examiner: Moderator:
 MANAGEMENT ACCOUNTING III (MODULE 1) SPECIAL EXAM 2023

Add;Net Variances (180)√

Production: Favourable 550 ½
Unfavourabl
e 2,130 ½

Sales Favourable 1,400 ½

Unfavourabl
e 0½

Actual Operating Income 6,820√

Question: 2 (25 marks)

2.1
EOQ = 2 x AD x P EOQ = 2 x AD x P
H Cost H Cost

= 2 x 4200 x (750 + 300) = 2 x 4200 x (650 + 300)

4 4

= 8820000 = 7980000
4 4

= 1485 Units √½ = 1413 Units√½

2.2 R

Original Profit 32,250.00√

Add; decrease in variable purchasing

costs

( 7 orders x R300) - (4200 / 1413 x R300) 1,208.28√

Examiner: Moderator:
 MANAGEMENT ACCOUNTING III (MODULE 1) SPECIAL EXAM 2023

Decrease in transportation costs

(R750 x 7) - (R650 x 4200 / 1413) 3,317.94√

Less: Increase in Stock holding costs

(R4 x 500) -(1413 / 2 x R4) (826.00)√

35,950.22√
Revised Profit √

2.3
Expected usage

2 - Monthly Sales Probability Expected

Value

500 0.15 75
600 0.20 120
700 0.30 210
800 0.20 160
900 0.15 135

Total 700 √

Stoc Annu Holdi

Expected Safety Re-order kout al Stk ng Total
out Cost
Usage Stock Point Units Costs Costs s

700 0 700 200 3240

Examiner: Moderator:
 MANAGEMENT ACCOUNTING III (MODULE 1) SPECIAL EXAM 2023

*√
2160
100 √
5
5400 0.00 400√

1620 3
700 100 800 100 √ 1 800 240√

3
700 200 900 0 0 3 600 600√

*200 x 18 x 6 x 0.15
Recommendation

Expected Costs are minimized at reorder level of 800 units which

includes
a safety stock of 100 units.

2.4 1) It assumes that demand can be

accurately estimated and that usage is
constant. √
2) Order costs may not necessarily
remain constant. √
3) Difficulty in accurately predicting
holding costs. √
4) Purchasing costs are assumed to be
constant and discounts may be
ignored. √

2.5 The goals of JIT philosophy include eliminating non-value-added activities, a batch size of one and zero inventories.
The objective of JIT purchasing is that delivery immediately precedes usage. √
The advantages are: (any 2)

Examiner: Moderator:
 MANAGEMENT ACCOUNTING III (MODULE 1) SPECIAL EXAM 2023

1) Substantial savings in holding costs.

2) Elimination of waste.
3) Savings in warehouse space.
4) Reduction in obsolete stock.
5) Reduction in paper work arising from not holding stocks.

The Disadvantages are: (any 2)

1)The investment in new machinery, plant layout and goods inward
facilities
2)Difficulty in predicting demand.
3)Increased risk due to disruption in supplies.

Question: 3 (30 marks)

Part A
a Actual Fixed Budget Variance
(for 10,000)
Fixed costs:
Supervision R 17,850 R 18,000 R150 F √
Depreciation 20,000 20,000 -0- √
Rent 10,000 10,000 -0- √
Variable costs:
Direct materials R 214,000 R 180,000 R 34,000 U √
Direct labour 320,000 250,000 70,000 U √
Supplies 2,500 2,000 500 U √
Indirect labour 10,000 10,000 -0- √
Power ___1,500 1,000 _____500 U √
Total costs R 595,850 R 491,000 √ R 104,850 U √

b Actual Flexible Budget Variance

Examiner: Moderator:
 MANAGEMENT ACCOUNTING III (MODULE 1) SPECIAL EXAM 2023

(for 12,000)
Fixed costs:
Supervision R 17,850 R 18,000  R 150 F ½
Depreciation 20,000 20,000  -0- ½
Rent 10,000 10,000  -0- ½
Variable costs:
Direct materials R 214,000 R 216,000  R 2,000 F ½
Direct labour 320,000 300,000  20,000 U ½
Supplies 2,500 2,400  100 U ½
Indirect labour 10,000 12,000  2,000 F ½
Power ___1,500 ___1,200  ____300 U ½
Total costs R 595,850 R 579,600  R 16,250 U

Part B
Activity-based budgeting identifies activities and demands for activity output, () and the cost of resources needed to
support the activity demanded. () The principal difference in an activity-based approach is a detailed listing of activities
() and their expected costs within the overhead, selling, and administrative expenses categories. () Activity-based
budgeting has the potential of being more accurate than traditional budgeting () because it focuses on output measures
for each activity and thus allows a manager to understand cost behaviour at a much more detailed level. ( ) Activity
flexed budgeting is also more accurate because it uses cost formulas that depend on each activity's output measure. ()
Any other valid points to a maximum of 7 marks.
Question 4: ( 15 marks)

4.1 Learning rate = Cumulative average time per unit

Previous cumulative average time per unit

(50 + 42)\2✓
50✓

0.92✓m

Examiner: Moderator:
 MANAGEMENT ACCOUNTING III (MODULE 1) SPECIAL EXAM 2023

4.2 Minimum total contract price:

R
Direct material (6 360\2 x 1.1 x 14) 48 972 ✓
Direct labour [5 520/(50+42)] x *481.12 28 867 ✓m
Variable overheads (14 x 481.12) 6 735 ✓m
Fixed manufacturing costs (68 000 x 14\16) 59 500 ✓
Total relevant costs 144 074
Add profit (144 074 x 25\75) 48 025 ✓
Contract price 192 099 ✓m

*Labour hours
Units Cumulative average time per unit Total
1 50^ 50^
2 46^ 92^
4 42.32^ 169.28^
8 38.93^ 311.44^
16 35.82^ 573.12^
(^ x 10 = 5marks)

Total time required to produce 16 units 573.12

Total time required to make 2 units (92)
Time required to make 14 units 481.12✓m

Examiner: Moderator: