MAC3701 Assignment 2 (COMPLETE ANSWERS) Semester 1 2026 - Due 16 April 2026

Application of Management Accounting Techniques - MAC3701 Assignment 2 Semester 1 2026 - Due 16 April 2026; 100 % TRUSTED workings, Expert Solved, Explanations and Solutions. For assistance call or W.h.a.t.s.a.p.p us on ...(.+.2.5.4.7.7.9.5.4.0.1.3.2)........... MAC3701 Assessment 2_S1_2026 [TURN OVER] MAC3701: COMPULSORY ASSESSMENT 01/S1/2026 (2026 academic year) Year Semester Assessment Due date April 2026 @ 11 pm CAT Take note of the following: • SUBMIT THIS ASSESSMENT ONLY ONLINE VIA myModule. • Ensure that your assessment has been submitted successfully online. Keep a screenshot of your submission page as proof of your online submission. • This assessment weighs 75% in the calculation of your year mark. Refer to TL101 section 7(d) • Study all the learning units as indicated on the module site before answering the assessment. • Complete the assessment within the prescribed time limit of three hours. Practising proper time management when answering questions is always a good idea. This will ensure optimum examination preparation. • This assessment must be submitted strictly on or before the due date. The assessment submission platform closes automatically on the due date; you will therefore not be able to submit after that date. • You are strongly urged to submit your assessment well before the due date to avoid the possibility of technical issues due to high online traffic volumes. • DO NOT send your assessment to the MAC3701 e-mail address. Assessments are only marked online via the myModule platform; therefore, emailed assessments cannot be marked. • In the unlikely event that you experience technical issues; you must immediately notify the lecturers via e-mail at • It is not possible to submit/resubmit your assessment after the due date, and students who did not submit this compulsory assessment will receive a 0% mark. • Refer to section 9.4.2 in Tutorial letter 101. You are reminded that your assessment must be your own work. You will receive 0% for your whole assessment if it was deemed that academic dishonesty has been committed in any part of the assessment and you may be subject to disciplinary proceedings by the University. This includes using artificial intelligence (AI), which is prohibited and deemed academic dishonesty. Ensure you are familiar with the information contained in the following link: Page 2 of 12 MAC3701 Assessment 2_S1_2026 QUESTION 1 (100 Marks; 180 Minutes) The Company information below applies to Parts A, B, C, D, and E of the exam question paper. The additional information provided in each Part is only applicable to that specific part of the exam question paper. For each Part below, remember: • You must clearly show all your calculations in detail (marks are awarded for calculations); • Where necessary, indicate irrelevant amounts/adjustments with an R0 (nil-value); • Round all your workings to two decimals, except where otherwise stated; and • Ignore time value of money and all taxation implications. Company information CocoNutCo (CNC) (Pty) Ltd operates in South Africa’s agro-processing sector, sourcing raw coconuts primarily from small-scale local farmers to promote sustainable farming and support rural communities. The company has expanded rapidly in recent years and now distributes its products throughout Europe, where growing expectations for ethical sourcing and environmental responsibility have begun to shape customer demand. CNC consists of a head office and two operating divisions: • CocoNutCo Processing Division (PD) • CocoPure Products Division (CPD) Processing Division (PD): The Processing Division has the capacity to process 3 million whole coconuts per year into three identifiable outputs: virgin coconut oil (VCO), fresh coconut water (FCWater) and coconut husk (Husk). VCO and FCWater are treated as joint products, while the Husk is classified as a by-product. Joint costs are allocated using the physical measure method at split-off. The production process involves washing, sorting and manually de-husking coconuts, followed by cracking, water extraction, filtration, and chilling. The coconut flesh is grated and cold-pressed to extract VCO. At the completion of this stage, both VCO and FCWater reach the split-off point. Minor handling and packaging costs are incurred before the Husk is sold to agricultural and horticultural markets. However, the division has recently encountered operational and ethical difficulties. Older workers employed in the labour-intensive de-husking process have reported muscle strain and related injuries. CNC has refused to cover medical expenses, leading to threats of strike action and rising concerns about employee welfare. In addition, adverse weather has pushed some coconut farmers to increase pesticide use, resulting in raw coconuts that fail to meet CNC’s sustainability standards and contributing to higher wastage. [TURN OVER] Page 3 of 12 MAC3701 Assessment 2_S1_2026 CocoPure Division (CPD): The CocoPure Division produces coconut oil cooking spray (COSpray) and flavoured coconut water (FCWater), both aimed at retail consumers. COSpray is made from cold-pressed VCO and positioned as a premium convenience product, while FCWater requires additional filtration, stabilisation, and natural flavouring before packaging. Research activities in this division focus on biotechnology and natural sciences to enhance product quality and promote high-value, wellness-oriented innovations. Despite its innovative focus, CPD has experienced pressure from increasing competition. Low-cost coconut products imported from Thailand have resulted in declining sales, challenging CNC’s ability to maintain its market share and premium positioning. Sourcing, Sustainability and Market Challenges CNC’s commitment to local sourcing has come under strain. Small-scale farmers have expressed dissatisfaction with compensation during periods of supply shortages, leading to the loss of several high-quality suppliers. Reduced supply quality—combined with pesticide-related issues—has led European buyers to question CNC’s sustainability and ethical sourcing practices. Export partners now require formal certification to verify compliance with environmental and ethical standards. Costing System CNC uses an absorption costing system and applies the FIFO method for inventory valuation. The company’s financial year ends on 28 February. [TURN OVER] Page 4 of 12 MAC3701 Assessment 2_S1_2026 Part A (28 Marks; 50 Minutes) The following is the actual information for the PD for the month of December: 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 220 000 whole coconuts were processed during the month. Actual yields from processing were: Description Yield Virgin coconut oil (VCO) Coconut water (FCWater) 0,35 litres per coconut 0,45 litres per coconut Coconut husk (Husk) 500 grams per coconut Raw coconuts were purchased at R18 per coconut. Processing is performed in batches of 500 coconuts per batch. Variable manufacturing overheads (VMO) were R440 per batch. The standard labour clock rate was R90 per work hour, and it takes 12 clock minutes to process one coconut. CNC allows for a 10% idle time. Fixed manufacturing overheads (FMO) for the month amounted to R150 000, which was initially budgeted for at R120 000 for the same level of production. Coconut water is further purified and pasteurised to improve its taste, clarity, and shelf life at a cost of R12 000 per Kilolitre (KL). The further-processed coconut water is sold for R70 a litre. The selling price at split off point for Virgin coconut oil is R120 per litre. The Husk by-product was dried and packaged at R1,20 per kg and sold for R5,00 per kg. 1.10 Total distribution costs for the month is based on the following regression equation: Delivery costs (y) = R0,75x + R18 000, where x represents the number of litres sold. 1.11 Administrative costs amount to R3 000 000 for the year. 1.12 There was no opening or closing inventory of raw materials, work-in-progress, or finished goods. REQUIRED PART A (A - a) Prepare PD’s actual statement of profit or loss and other comprehensive income (income statement) for the month ended December 2025. • Provide a column for each product and a total column. • 1 KL is 1 000L ( A - b) From the company information only, Identify and briefly discuss any four business and social risks associated with CNC. (20) (8) [TURN OVER] Page 5 of 12 MAC3701 Assessment 2_S1_2026 PART B (25 Marks; 45 Minutes) Management is evaluating the research team's proposal for a commercial launch of a new premium product, “Probiotic VCO”. The research proposes an initial production run of 35,000 litres, packaged in 1-litre bottles. The Probiotic VCO is formulated by combining high-quality Virgin Coconut Oil (VCO) with a carefully selected probiotic culture, creating a functional product that blends the natural health benefits of coconut oil with the digestive and immune support properties of probiotics. The following information has been provided to assist management in determining the appropriate selling price per bottle: 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. 2.9. The VCO will be sourced from an external supplier at a cost of R60 per litre. The research costs amounted to R100 000 on product development and testing of Probiotic VCO. 1 litre special glass bottles are required at a cost of R5 per bottle. The production of Probiotic VCO requires the addition of 80kg of Probiotic Culture per 100 litres of VCO. 50 buckets (80 kg each) were left over from the product development testing and purchased for R750 each. The market price for one 80kg bucket of Probiotic Culture is R800. Each litre of Probiotic VCO requires one stabiliser pack called Input Z to protect probiotic activity during blending. Imported Input Z can only be purchased in batches of 50 packets at R250 per batch. The additional blending and infusion machine time required for Probiotic VCO is 6 minutes per litre, and the cost is R45 per machine hour. The blending machine was purchased 2 years ago for research purposes with an R8 000 000 loan at 10,50% interest per annum and is depreciated over its intended useful life of 8 years. Normal direct labour time to process Probiotic VCO is 3 minutes per litre at R90 per clock hour. Due to the specialised handling and enhanced quality-control checks, overtime will be worked on only 10 000 litres of the order. The overtime rate is 1,5 times the normal rate. 2.10. Fixed Manufacturing overheads are allocated to VCO using a budgeted absorption rate of R1 500 per 1 000 litres. Additional fixed costs of R1,50 per litre will be incurred due to the production of Probiotic VCO. 2.11. CNC’s pricing policy is to add a 30% mark-up on total relevant costs. [TURN OVER] Page 6 of 12 MAC3701 Assessment 2_S1_2026 PART B (continued) REQUIRED PART B (B - a) Draft a memorandum to management in which you recommend the selling price of one litre of the Probiotic VCO, taking into consideration the pricing policy of CNC. (19) As part of your calculation, you must: • Focus on the application of the relevant costing principles. • Provide reasons for the inclusion or exclusion of all amounts based on the above principles. (B - b) Briefly discuss three qualitative factors that the management of CNC should consider before continuing with the launch of the new production line. Total Part B (6) 25 [TURN OVER] Page 7 of 12 MAC3701 Assessment 2_S1_2026 PART C (17 Marks; 31 Minutes) During January 2026, CPD had a standard costing system in place for its two primary finished products, COSpray (Coconut Oil Cooking Spray) and FCWater (Flavoured Coconut Water). The following information was extracted from the January 2026 budgeted and actual information: Details FCWater R COSpray R Budgeted selling price per unit 150 Budgeted contribution per unit 38 45 Actual contribution per unit 25 42 Budgeted gross profit per unit 22 35 Actual gross profit per unit 20 32 3.1. Sales 18 CPD budgeted to sell 20 000 litres of COSpray and 30 000 litres of FCWater. Due to strong brand positioning in the wellness market, management implemented a 5% sales price increase. As a result, COSpray's actual sales volume increased by 2%, while FCWater's decreased by 10%. 3.2. Material required for COSpray • CPD’s actual production was equivalent to its budgeted sales demand for the month. • There was no budgeted opening or closing inventory for any raw materials or finished goods. The standard Virgin Coconut Oil (VCO) and Propellant Blend (PB) required for 1 unit of COSpray are: Details Standard litres per unit VCO R per Unit 850ml PB R85 100ml R3,50 • The actual VCO and PB purchased and issued to the production of COSpray are: Details Purchased VCO 22 500 litres for R2 137 500 Issued PB 19 500 litres 3 500 litres for R84 000 3 200 litres [TURN OVER] Page 8 of 12 MAC3701 Assessment 2_S1_2026 PART C (continued) 3.3. Human Resources The budgeted time required to produce a litre of FCWater was 2 clock minutes per litre and the allowed idle time was 3%. The standard labour rate was R72,75 per clock hour. Wage records for January 2026 indicate that it took a total of 625 clock hours at an actual rate of R75 per clock hour to produce 28 000 litres of FCWater. The actual idle time for January 2026 was 4%. REQUIRED: PART C (C - a) Calculate the sales mix variance per product type and in total for January 2026. (5) (C - b) Calculate the Propellant Blend purchase price variance for January (3) 2026 (COSpray only) (C - c) Calculate the direct material yield variance for COSpray (per material (5) type and in total). (C - d) Calculate the direct labour idle time variance for FCWater in January (4) 2026. Total Part C 17 [TURN OVER] Page 9 of 12 MAC3701 Assessment 2_S1_2026 PART D (15 Marks; 27 Minutes) PD has been experiencing growing demand for its FCWater product. The production manager must prepare a production budget and establish required raw material purchases for Quarter 2 of 2026. You gathered the following information for FCWater : 4.1. 4.2. 4.3. Sales forecast  The sales forecast for each month is as follows: Details April 2026 May 2026 June 2026 Sales (litres) 120 000 125 000 132 000  The sales for July 2026 are expected to increase by 5% of June 2026 sales. Finished Goods Policy  The opening finished goods inventory on 31 March 2026 is 10 000 litres.  Finished goods closing inventory must be 20% of next month’s sales. Production information  CNC has a policy to keep the whole coconut closing inventory equal to 10% of coconuts processed.  Actual yields from processing of coconuts throughout the quarter are expected to be 0,40 litres and 0,60 litres per coconut for VCO and FCWater, respectively. REQUIRED: PART D (D - a) Prepare the production budget (in litres) for each month from April to June 2026 (D - b) Calculate the total number of coconuts that would have to be purchased for Q2 For answering this question only, assume the following: • Total production of FCWater for Q2 is 427 500 litres (10) (5) • The processing of whole coconuts results in a 5% normal loss identified at the beginning of the process. • Coconut purchases are spread evenly throughout the quarter Total Part D 15 [TURN OVER] Page 10 of 12 MAC3701 Assessment 2_S1_2026 PART E (15 Marks; 27 Minutes) To improve costing accuracy, the CPD division is evaluating the suitability of Activity-Based Costing (ABC) as an alternative to its current traditional costing system. The Senior Management Accountant (SMA) at CPD sent the following email to the current intern: To: Subject: Review of Costing Approach for CPD Mon 2026/03/20 08:00 Dear Intern, I am heading into a management meeting shortly regarding our current costing approach for CPD and need your assistance with an exercise on Activity-Based Costing (ABC). Currently, fixed manufacturing overheads (FMO) are budgeted at R2 200 000 for the year and are allocated based on clock hours at a budgeted rate of R137,50 per clock hour. The actual FMO for the year amounts to R1 980 000. There are concerns that this method may no longer accurately reflect our production processes. Below is an extract of our actual annual production data and preliminary ABC investigations into budget data. To implement ABC, we will have an initial upfront cost of R150 000. Annual Production data Details COSpray Litres Produced FCWater 288 000 Total Clock hours 360 000 648 000 9 000 Preliminary budget ABC Data 7 000 Identification of activities, cost per activity and related cost drivers Activity 16 000 Cost (R) Cost Driver Mixing & processing 1 100 000 Batch setups Machine hours 600 000 Setups Quality inspections 500 000 Total FMO Inspections 2 200 000 COSpray Machine hours FCWater 3 minutes per hour Set ups 4,5 minutes per hour 1 for every 8th litre Inspections 1 for every 6th litre At every 4 500 litres At every 6 000 litres Kind regards, Senior Management Accountant CPD [TURN OVER] Page 11 of 12 MAC3701 Assessment 2_S1_2026 PART E (continued) Response from Intern To: Subject: Review of Costing Approach for CPD Mon 2026/03/20 14:15 Dear SMA, Thank you for your email. I believe ABC will improve our overhead allocation as ABC allocates overheads primarily based on production volume, but in a more detailed way by grouping costs into different activities. This still ensures that costs are spread more accurately across products based on output levels. See my calculation below: ABC: Allocation of FMO and cost per unit Activity Cost Driver Activity Rate R COSpray R Mixing & Processing Clock hours 68,75 618 750 FCwater R Notes Batch Setups 481 250 Set Ups 6,25 225 000 1 Quality Inspections 375 000 Inspections 4 188,15 231 959 2 Total 268 041 3 1 075 709 Note 1: 1 124 291 Activity rate is the total FMO (R1 100 000) ÷ total clock hours (16 000) = R68,75 FMO allocated: COSpray: R618 750 (R68,75 x 9000); FCWater: R481 250 (R68,75x 7 000) Note 2: Activity rate is the total FMO (R600 000) ÷ total set ups (96 000) = R6,25 FMO allocated: COSpray: R225 000 (R6,25 x 36 000); FCWater: R375 000 (R6,25 x 60 000) Note 3: Activity rate is the total FMO (R500 000) ÷ total inspections (119) = R4 188,15 FMO allocated: COSpray: R231 959 (R4188,15 x 55); FCWater: R268 041 (R4 188,15 x 64) Kind Regards Intern [TURN OVER] Page 12 of 12 MAC3701 Assessment 2_S1_2026 PART E (continued) REQUIRED: PART E (E - a) Calculate the total over- or under-absorption amount to be included in the actual Statement of Profit and Loss for the current financial year and indicate if this amount will be reflected as an income or an expense. (E - b) Critically evaluate the responses and ABC calculations proposed by the Intern to the senior management accountant of CPD. In your critical evaluation, you must: (4) (9) • Indicate whether and provide a reason why you agree/disagree with each amount or statement. • Review all the information/workings for errors and/ or omissions, and where applicable, provide correct workings (round up activity rates to two decimal places). (E - c) Assume that the use of Activity-Based Costing (ABC) results in a reallocation of FMO, where the total FMO allocated to COSpray decreases by R12 000, and the corresponding FMO increase of R12 000 is allocated to FCWater. Evaluate whether implementing Activity‑Based Costing (ABC) would be justified for CPD by analysing its potential benefits and impact on organisational and product profitability. Total Part E (2) 15 © UNISA 2026 All rights reserved. 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