MAIN ONLINE SUMMATIVE ASSESSMENT
PROGRAMME Bachelor of Commerce in Financial Management
MODULE Cost Accounting (Financial Management 2A)
INTAKE January 2021
DATE 10 June 2021
TOTAL MARKS 100
SECTION A [100 MARKS]
Answer ALL the questions in this section.
Question 1 (20 Marks)
Use the information provided below to answer the following questions:
1.1 Prepare the Overhead Allocation Statement that reflects the primary and secondary allocation of (12 marks)
overheads.
1.2 Calculate the allocation rate of each of the production departments. Express the answers to the (4 marks)
nearest cent.
1.3 Calculate the overheads applied to each unit of the product. Express the answers to the nearest (4 marks)
cent.
INFORMATION
¦ Kansas Ltd gathered the following statistics in order to allocate the overheads among the different
departments for 2022:
Production Production Service
Department A Department B
Department M
Number of employees 600 360 240
Direct labour hours 12 000 8 000 4 000
Plant and equipment at cost R300 000 R200 000 R100 000
Materials usage R360 000 R180 000 R60 000
Machine hours 3 000 1 500 500
Floor area in square metres 4 000 4 000 2 000
¦ The budgeted overheads for 2022 are as follows:
Overheads R
Rent expense 120 000
Depreciation on plant and equipment 60 000
Utilities 72 000
Uniforms for employees 36 000
Rest room 12 000
Insurance:
Buildings 24 000
Plant and equipment 30 000
¦ The product spends 5 labour hours in Production Department A and 2.5 labour hours in Production
Department B.
¦ The overhead allocation rates are based on labour hours, while the secondary apportionment of the service
department takes place according to machine hours.
Question 2 (20 Marks)
Use the information provided below to prepare the Income Statement of Albert Enterprises for the year ended 31 May 2021
using each of the following methods:
2.1 Variable costing (11 marks)
2.2 Absorption costing. (9 marks)
INFORMATION
The information given below relates to Albert Enterprises for the financial year ended 31 May 2021:
Inventory on 01 June 2020 3 000 units
Sales (R160 per unit) 18 000 units
Production 20 000 units
Direct materials R1 080 000
Direct labour R378 000
Manufacturing overheads:
Fixed R216 000
Variable R4.32 per unit
Fixed administrative overheads R160 000
Selling overheads:
Fixed R180 000
Variable R3 per unit
Additional information
The manufacturing costs for the year ended 31 May 2021 were 8% higher than that of the previous financial year.
Question 3 (20 Marks)
Use the information provided below to calculate the following:
3.1 Manufacturing costs per unit and total manufacturing costs, if all the overheads costs are absorbed (6 marks)
on a machine hour basis.
3.2 Unit overheads costs per product using the ABC system. (14 marks)
INFORMATION
Arctic Limited manufactures two products and the company is keen on applying the principles of the ABC system.
Relevant information pertaining to the two products for a given period appear below:
Product A Product B
Output 480 units 360 units
Machine hours per unit 14 hours 10 hours
Direct materials cost per unit R400 R320
Direct labour cost per unit R196 R140
The two products are similar and are usually produced in production runs of 40 units and sold in batches of 20.
Currently the production overheads are absorbed by using a machine hour rate, and the production overheads for
the period are as follows:
Machine department costs (rent, rates, depreciation and supervision) 103 200
Set-up costs 50 400
Stores receiving 37 200
Quality control 21 000
Materials handling and dispatch 46 200
The cost drivers to be used for the overhead costs are as follows:
Cost Cost driver
Machine department costs Machine hours
Set up costs Number of production runs
Stores receiving Requisitions raised
Quality control Number of production runs
Materials handling and dispatch Orders executed
The number of requisitions raised was 80 for each product and the number of orders executed was 42, each order
being for a batch of 20 of a product.
Question 4 (20 Marks)
Use the information provided below to prepare the following statements:
4.1 Cost statement for the year ended 28 February 2021 that shows the cost of goods manufactured (16 marks)
and cost of goods sold
4.2 Income Statement for the year ended 28 February 2021. (4 marks)
INFORMATION
The following information was supplied by Vortex Ltd for Product Y (which it manufactures) for the year ended 28
February 2021:
Materials:
Opening inventory 190 000 kg at a cost of R475 000
Purchases during the year 860 000 kg at R6.50 per kg
Closing inventory 50 000 kg
Direct labour:
Hours worked during the year 380 000
Rate per hour R25
Manufacturing overheads Applied on direct labour hours at a rate of R15 per hour
Work in progress:
Opening inventory R500 000
Closing inventory R400 000
Finished goods:
Opening inventory 20 000 units
Manufactured 100 000 units
Sales 90 000 units
Selling price per unit R610
The following information is also available:
¦ Actual manufacturing overheads amounted to R5 510 000.
¦ The first-in-first-out (FIFO) method of costing inventories is used.
¦ Manufacturing overheads under- or over-applied must be charged to cost of sales.
¦ The actual cost of the opening inventory of finished goods was R200 per unit.
¦ Administrative and marketing costs for the period amounted to R6 000 000.
Question 5 (20 Marks)
Answer the questions from the information provided.
5.1 Use the information provided below to calculate the following variances. In each case state whether (12 marks)
the variance is favourable or unfavourable.
5.1.1 Materials issue price variance (3 marks)
5.1.2 Materials quantity variance (3 marks)
5.1.3 Labour rate variance (3 marks)
5.1.4 Labour efficiency variance (3 marks)
INFORMATION
Standards:
The following standards were set by Amos Manufacturers for Product Zap:
Raw materials: 4 kilograms of Material K at a price of R6 per kilogram.
Direct labour: 3 labour hours at a rate of R40 per hour.
Standard production: 3 200 units
Actual information for May 2021
12 000 kg of Material K was purchased for R75 600. 3 000 units of Product Zap were produced using 11 400 kg of
Material K.
The wage records showed that it took 9 500 hours at R38 per hour to produce the 3 000 units of Product Zap.
5.2 Use the information provided below to calculate the following overheads variances. In each case (8 marks)
state whether the variance is favourable or unfavourable.
5.2.1 Variable overheads efficiency variance (3 marks)
5.2.2 Variable overheads expenditure variance (3 marks)
5.2.3 Fixed overheads expenditure variance (2 marks)
INFORMATION
Continental Manufacturers whose output is Product Y provided the following information for May 2021:
Budgeted figures:
Variable manufacturing overheads R96 000 (based on labour hours)
Fixed manufacturing overheads R192 000
Labour hours 19 200
Expected production 4 800 units
Actual results:
Variable manufacturing overheads R105 300
Fixed manufacturing overheads R200 000
Labour hours worked 19 500
Actual production 5 000 units
