Paper 1. Question The accuracy of entries into staff records. (1) No person may make a false entry in a record maintained.

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1 Paper 1 Question The place and function of cost accounting. (8) Cost accounting is the process (1) to compile the cost of producing (1) a certain product, and this will include services and activities. This information is very important to make decisions. (1) Cost accounting is not only used in the manufacturing environment, (1) but also in service and non-profit organisations. (1) Cost accounting is also used to help to determine and evaluate (1) the cost of products and services (1) provided by government institutions, education, hospitals and churches. (1) 1.2. The functions of management accounting. (7) Management accounting is about the planning (1) and control (1) of decisions Planning decisions will set the goals (1) and design the actions (1) to achieve the goals Control decisions on the other hand are comparisons (1) of actual results with expected results (1) and the imposition of accountability for deviations from the standards originally set (1) 2.1. The information that must be kept of each employee. (5) Every employer must keep a record containing at least the following information: The employee's name and occupation (1) The time worked by each employee (1) The remuneration paid to each employee (1) Independent Institute of Education Assessment Bank 2009 Independent Institute of Education (Pty) Ltd 2009 Page 3 of 18 The date of birth of any employee under 18 years of age (1) Any other prescribed information (1) 2.2. The time period for which such information must be kept. (2) A record must be kept by the employer for a period of three years (1) from the date of the last entry in the record. (1) 2.3. The accuracy of entries into staff records. (1) No person may make a false entry in a record maintained. (1) 2.4. The keeping of additional records if an employer already complies with this section of the Act. (2) An employer who keeps a record in terms of this section is not required to keep any other record of time worked (1) and remuneration paid (1) as required by any other employment law. Question 3 Establishment Discuss and plan where the enterprise will be established (2) Factory layout Time of moving material and labour around must be limited. And the layout must be as effective as possible (2) Production line The production line must be designed so that the capacities of the machines in successive processes are synchronised, and to keep the capacity to the minimum (2) Number of employees required, degree of skills required, training of employees (2) Material Availability of raw material is essential the quality of the raw materials, stage of processing and alternative materials (2) 1

2 Question 4 Use the High-Low method to calculate: 4.1. The variable cost per hour of continuous operation. (8) Variable cost element Maintenance costs (Rand) Hours of continuous operation 3,030 (1) 250 (1) 2,290 (1) 180 (1) (1) (1) Variable cost element = 740 / 70 = R10.57 per unit 4.2. The fixed cost element of the maintenance costs. (3) Fixed element = Total cost - variable cost/hour (1) = (180 x 10.57) (1) = = (1) 4.3. What would the expected maintenance cost be if Joseph ensures that the refrigerators are serviced every 220 hours? (4) Estimated maintenance cost at 220 hours of operation: Estimated maintenance cost = Fixed cost + Variable cost/hour (1) Estimated maintenance cost = R (220 x R10.57) (1) Estimated maintenance cost = R (2) Question 5 Time period Unit produced Overheads (x) (y) xy x 2 Week Week Week Week Week Week Week Week Week (1) (1) Σx Σy Σxy Σx 2 = Na + bσx..(1) Σy Σxy = aσx + bσx 2.(2) = 9a b (3) (1) = 1 320a b.(4) (1) = a b.(3) x (1) = a (4) x 9 (1) (24 000) 0 + (28 800)b (1) 0.83 = b (1) Substitute b= 0.83 in Equation (3) and solve a = 9a B (1) = 9a + (0.83 x 1 320) (1) = 9a (1) = a (1) The cost function is: Y = a + bx (1) Y = b (2) 2

3 Question The economic ordering quantity (9) Annual usage Order cost R Holding costs R 1.45 Lead time 8 days EOQ = ((2 x 35 x ) / 1.45) EOQ = ( / 1.45) EOQ = EOQ= 932 (2) 6.2. How many orders will have to be placed per year? (4) Number of orders to be placed per year = Annual usage / EOQ (1) Number of orders to be placed per year = / 932 (2) Number of orders to be placed per year = 19.3 orders per year (1) 6.3. The ordering point (7) Order point = Maximum lead time x Maximum usage per time period (1) Order point = 8 x (18 000/365) (3) Order point = 8 x 49.3 (1) Order point = 395 (2) Question List the different sub-budgets prepared as part of the master manufacturing budget. (5) The master manufacturing budget can be broken up into a: Raw materials budget (1) Labour budget (1) Manufacturing Overheads budget (1) Inventory budget (1) Purchasing budget (1) 7.2. When controlling budgets, managers look at the budget variances. A budget variance can be one of two (2) types. Name these types and explain what each type of variance means with the aid of an example. (5) A variance can be described as favourable or unfavourable (1) Favourable means that what actually happened is better than what had been planned e. g. o Actual sales = R while Budgeted sales = R (1) or o Any other relevant example Unfavourable means that what actually happened is worse than what had been planned e. g. o Actual sales = R while Budgeted sales = R (1) or o Any other relevant example 3

4 Question Budgeted overheads represent an estimated amount of what future overheads should be (1), whilst applied overheads refer to the amount of overheads which were applied to the production process. (1) Production unit basis Applied Manufacturing O/heads = Budgeted Manufacturing O/Heads (1) Budgeted units Applied Manufacturing O/heads = 57,500 (1) 5,000 Applied Manufacturing O/heads = per unit (1) Labour hour basis Applied Manufacturing O/heads = Budgeted Manufacturing O/Heads (1) Budgeted Labour hours Applied Manufacturing O/heads = 57,500 (1) 6,250 Applied Manufacturing O/heads = 9.20 per labour hour (1) Labour cost basis Applied Manufacturing O/heads = Budgeted Manufacturing O/Heads x 100 (1) Budgeted labour cost Applied Manufacturing O/heads = 57,500 x100 (1) 76,000 Applied Manufacturing O/heads = 75.66% of labour cost (1) Material Cost Basis Applied Manufacturing O/heads = Budgeted Manufacturing O/Heads x 100 (1) Budgeted material cost Applied Manufacturing O/heads = 57,500 X 100 (1) 151,000 Applied Manufacturing O/heads = 38.08% of material cost (1) Primary cost basis Applied Manufacturing O/heads = Budgeted Manufacturing O/Heads x 100 (1) Budgeted Mat cost + Budgeted Labour cost Applied Manufacturing O/heads = 57,500 X 100 (1) 227,000 Applied Manufacturing O/heads = 25.33% of primary cost (1) Machine hour basis Applied Manufacturing O/heads = Budgeted Manufacturing O/Heads x 100 (1) Budgeted machine hours Applied Manufacturing O/heads = 57,500 (1) 1,250 Applied Manufacturing O/heads = per machine hour (1) 4

5 Question 9 Calculate the overhead cost per product type using: 9.1. a traditional absorption costing system (11) 9.2. an ABC system (19) 9.1. Traditional absorption costing system Cost centre allocated costs A B A/B Total direct labour hours Overhead rate per direct hour Manufacturing time: A Manufacturing time: B Overheads per unit: A Overheads per unit: B Activity Based Costing Activities Activity Rate/ Activity Product PB1 Activity Rate/ Activity Product PB2 Material handling , ,742 Material procurement , ,491 Set-up 35 1,604 56, ,604 19,251 Quality control , ,600 Production , ,650 Total 972, ,734 Number of products 110,000 44,000 Overhead cost per unit Question Calculation of overhead rates - Direct Material Cost base Budgeted overheads x 100 (1) Budgeted direct material = 78,500 x 100 (2) 154,000 = 51% of material cost (1) Calculation of overhead rates - Direct Labour hours base Budgeted overheads x 100 (1) Budgeted direct labour = 78,500 x 100 (2) 16,800 = 4.67 per hour (1) 5

6 10.2. Calculation of total cost for job Poli/421/08: Direct materials as base Direct labour as base Direct material Direct Labour 8,400 8,400 Manufacturing overheads (51% of direct material) 4,282 (1) R4.08 per direct labour hour 3,140 (1) (1) (1) Actual overheads 84, (1) Less Applied overheads 83, (1) 1, Under applied (1) Question Estimate profit Original contract price Extras Estimated total costs: ( ) ( ) ( ) costs to date estimated additional costs Estimated profit/ (loss) Costs to date to estimated total costs 31-Mar Mar Mar-06 Estimated profit/ (loss) Percentage of completion = Percentage of completion = 27% 78% 100% Profit/ (loss) to date Less Profit/ (loss) previous year - (62 043) ( ) Profit/ (loss) for the year Work certified to total contract price 31-Mar Mar Mar-06 Estimated profit/ (loss) Percentage of completion = Percentage of completion = 15% 49% 100% Profit/ (loss) to date Less Profit/ (loss) previous year - (33 796) ( ) Profit/ (loss) for the year

7 Paper 2 Question 1 Observations No. of Calls Rands Highest Lowest Difference Therefore the variable cost per call is (5 110/ 7 000) R0.73 (7) 1.2 Fixed cost per month. (3) Total cost at calls is Less: Variable costs ( x 0.73)= Therefore fixed cost is R8 940 (3) Question Manufacturing Statement of Tic Toc Ltd for July: Direct materials used Raw materials 1 July Purchases Raw materials 31 July (5 000) Direct labour Primary costs Manufacturing overheads Property rental (1500 x 80%) Electricity (1 000 x 80%) 800 Total manufacturing costs Work in progress movement 200 Work in progress 1 July Work in progress 31 July (800) Cost of finished goods manufactured Manufacturing profit (9 900 x 25%) Cost of finished goods transferred to sales 2.2 Calculate the cost of each clock manufactured during July. (3) Cost of finished clocks manufactured R9 900 Number of clocks manufactured 520 Cost per clock R19.04 Question 3 (Theory) 7

8 Question 4 Calculation of activity rates: Activity Activity Cost Cost Driver Volumes Activity Rates Material procurement (1) 70 (1) (1) Material handling (1) 275 (1) 520 (1) Factory cleaning (1) 650 (1) 40 (1) Human resource management (1) 40 (1) 850 (1) Factory rental (1) 650 (1) 155 (1) Overhead allocation per unit: Activity Cups Saucers Material procurement 25 x (1) 45 x (1) Material handling 125 x (1) 150 x (1) Factory cleaning 250 x (1) 400 x (1) Human resource management 25 x (1) 15 x (1) Factory rental 250 x (1) 400 x (1) Total Number of units (1) (1) Overhead allocation per unit R (2) R (2) Question Calculate the net wage Ben will receive for this week. (Work to the nearest cent.) Hourly Rate = R12.50 Hours Hourly Rate Rands Normal Hours (2) Overtime x 1½ (2) Overtime x (2) Gross Earnings (1) Deductions Pension Employee 8% (45) (1) Medical Aid Employee (85.00) (1) UIF Employee 1% (9.31) (1) PAYE 15% (139.69) (2) Net Wage R (2) 5.2 What would the cost to the company be for Ben if no overtime was worked in a week? (6) Hours Rates Rands Normal hours (2) Pension Employer 8% (1) Medical Aid Employer (1) UIF Employer 1% 5.63 (1) Cost to Company (1) 8

9 Question If a shopkeeper buys a chair for R155 and sells it for R200, what is his gross margin percentage? (3) Selling price 200 Cost 155 Profit/ gross margin 45 Gross margin percentage 22.5% 7.2 If you purchase a cell phone for R and it has been marked up by 30%, what did it originally cost? (3) Selling price Mark up percentage 30% Original cost ( /1.30) A pizza shop wants to make R12.65 profit on a pizza with a cost price of R What will the gross margin percentage be? (4) Cost of pizza Required profit Selling price must be Therefore gross margin percentage is 23% 7.4 A loaf of bread sells for R6.85 in the shop. If the mark up on sales price is 71.25%, what is the gross margin in Rands? (3) Cost 6.85 Mark up (6.85 x ) 4.88 Therefore gross margin is A carpenter buys a piece of wood for R His employee spends 15 hours making a table from the wood. The employee earns R25 per hour. If he sells the table for R2 925, what is the gross margin percentage? (5) Cost of wood (direct material) Cost of employee (direct labour) (15 x 25) 375 Total cost Selling price Therefore gross margin is Gross margin percentage (1 050/ 2 925) 35.9% 9

10 Question Calculate the profit or (loss) made on Job 802. (12) Income Statement for Job 802: Total materials issued ( ) (1) (1) Total overheads incurred ( ) (1) (1) Sales (1) Cost accumulated to July ( )(1) Materials costs (Job 803) August (24 000)(1) Labour costs (Job 803) August (12 500)(1) Overhead allocation(job 803) August (53 595) ((24 000/ ) * ) (1) (1) Total costs completed Job 802 ( )(1) Profit on Job (1) 8.2 How much cost has been accumulated to Job 803? (5) Costs accumulated to the end of July 0 Materials costs - August (1) Labour costs - August (1) Overhead allocation August ((57 500/ )* ) (1) (1) Totals costs accumulated to Job (1) 8.3 What is the value of the inventory at the end of August? (10) Balance at the end of July (1) (1) Purchases August (1) (1) Issues Job 802 (24 000) (1) (1) Issues Job 803 (57 500) (1) (1) Balance at end of August (1) (1) 10

11 Question Using the weighted average method calculate what the value of the closing stock for May will be. (13) Date Description No. of Items Cost Per Item Rands 1 Opening balance (1) 4 Sale (240) 3.00 (720.00) (1) Balance (1) 10 Purchase (1) Balance (1) 20 Sale (310) 3.10 (961.00) (1) 24 Sale (210) 3.10 (651.00) (1) Balance (1) 26 Purchase (1) 28 Closing balance (1) (1) The value of the closing stock for May is R (1) (1) 9.2 If material XYZ sells for R6.00 per item, calculate the gross profit and gross margin percentage for May. (12) No. of items sold ( ) 760(1) Selling price per item 6.00(1) Total sales for May (1) Cost of sales for May (1) Sold on 4 (240 * 3.00) (720.00)(1) (1) Sold on 20 (310 * 3.10) (961.00)(1) (1) Sold on 24 (210 * 3.10) (651.00)(1) (1) Gross profit (1) Gross margin percentage 48.9%(1) 9.3 What does LIFO stand for? (1) Last in First Out. (1) 11

Both Isitya and Ikopi renders more net profit after further processing and should therefore be processed further.

Both Isitya and Ikopi renders more net profit after further processing and should therefore be processed further. OCT/NOV MAC2601 1.1 C Units purchased: 1 200 units Purchase price R6.80 Freight charges 0.68 Total 7.48 Value is therefore equal to 1200 units*7.48=r8 976 1.2 B 1.3 B 200 000 / 40 000 = R5 per machine