MAC2601 Assignment 2 Semester 1 Memo | Due 17 April 2026

, PLEASE USE THIS DOCUMENT AS A GUIDE ONLY

 QUESTION 1

(a) Income Statements

i) Direct Costing (Variable Costing) Method

Sales (17,000 units × R400)
= R6,800,000

Less: Variable Costs (17,000 units × R285)
= R4,845,000

 Direct materials: 120
 Direct labour: 80
 Variable manuf. overhead: 60
 Variable selling/admin: 25
= R285 per unit

Contribution Margin
= R1,955,000

Less: Fixed Costs

 Fixed manufacturing overhead: R1,800,000
 Fixed selling/admin: R500,000
= R2,300,000

Net Profit (Direct Costing)
= –R345,000 (Loss)

, ii) Absorption Costing Method

Sales (17,000 units × R400)
= R6,800,000

Cost of Goods Sold (COGS):

 Opening inventory (5,000 units × R405) = R2,025,000
 Production costs (19,000 units × R405) = R7,695,000
(Variable 260 + Fixed OH 105 = R365 per unit; but fixed OH allocated at predetermined rate =
R2,000,000 ÷ 20,000 = R100 per unit → total R405 per unit)
 Goods available for sale = R9,720,000
 Closing inventory (2,000 units × R405) = R810,000
 COGS = R8,910,000

Gross Profit
= R6,800,000 – R8,910,000 = –R2,110,000 (Loss)

Less: Selling/Admin (Variable + Fixed)

 Variable (17,000 × R25) = R425,000
 Fixed = R500,000
= R925,000

Net Profit (Absorption Costing)
= –R3,035,000 (Loss)