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MAC3701: Application of Man-
agement Accounting Techniques
Comprehensive Exam Revision Guide
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
Management Accounting — College of Accounting Sciences
Exam Revision Guide
MAC3701
Module Code:
Application of Management Account-
Module Name: ing Techniques
May/June 2025 & May/June 2023
Papers Covered:
100 marks each paper
Total Marks:
3 Hours per paper
Duration:
University of South Africa (UNISA)
Institution:
Understand the techniques, not just the answers. Show all workings.
Exam Revision Notes | MAC3701 | 2025
,MAC3701 | Exam Revision Application of Management Accounting Techniques
PAPER 1: UNIVERSITY EXAMINATIONS — MAY/JUNE 2025
MAC3701 | Application of Management Accounting Techniques | 100 Marks
| 3 Hours
Key Concept
Company Background — Pedal Pump Pty Ltd (PP): PP is a South African
company that manufactures and sells two pump products: SPump (small pump) and
BPump (big pump). The company uses an absorption costing system, values all
inventory items using the first-in-first-out (FIFO) method, and has a 31 Decem-
ber financial year-end. PP obtained a “compliant” compliance rating for a recent
compliance inspection after paying a “facilitation fee” — an ethically questionable act.
Page 2 of 27
, MAC3701 | Exam Revision Application of Management Accounting Techniques
Part A 20 marks | 36 minutes
(A-a) 20 marks
Question: Pedal Pump Pty Ltd (PP) is finalising budgets for the 2025 financial year and
budgeted to achieve a profit of R28.5 million. The cost accountant presented the following
calculation for the budgeted units to achieve the target profit:
Details per unit SPump (R) BPump (R)
Selling price 2 500 4 500
Less: Total prime costs (1 500) (2 700)
Less: Manufacturing overheads (230) (230)
Less: Selling & distribution costs (35) (35)
Contribution per unit 735 1 535
Additional information:
• Budgeted production: 60 000 SPump and 40 000 BPump units.
• Sales price: R2 500 (SPump) and R4 500 (BPump).
• Prime costs = 70% of selling price.
• Manufacturing overheads: FMO = R150/unit; VMO = R80/unit (both products).
• Total selling & distribution costs = R10 million; variable component = R35/unit.
• Fixed administrative costs = R12.5 million.
Required: Critically evaluate the cost accountant’s calculation of units required to achieve
the target profit, indicating whether you agree/disagree with each amount, correcting any
errors or omissions.
Answer: Critical evaluation of the cost accountant’s target-profit calculation:
Step 1 – Identify and correct the contribution per unit
The cost accountant deducted total manufacturing overheads (FMO + VMO = R150
+ R80 = R230) from the selling price to arrive at contribution. This is wrong. Under
the contribution approach (variable costing), fixed manufacturing overheads
(FMO) are period costs and must not be deducted from the selling price when
calculating contribution per unit. Only variable costs are deducted.
Page 3 of 27
⋆ ⋆
MAC3701: Application of Man-
agement Accounting Techniques
Comprehensive Exam Revision Guide
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
Management Accounting — College of Accounting Sciences
Exam Revision Guide
MAC3701
Module Code:
Application of Management Account-
Module Name: ing Techniques
May/June 2025 & May/June 2023
Papers Covered:
100 marks each paper
Total Marks:
3 Hours per paper
Duration:
University of South Africa (UNISA)
Institution:
Understand the techniques, not just the answers. Show all workings.
Exam Revision Notes | MAC3701 | 2025
,MAC3701 | Exam Revision Application of Management Accounting Techniques
PAPER 1: UNIVERSITY EXAMINATIONS — MAY/JUNE 2025
MAC3701 | Application of Management Accounting Techniques | 100 Marks
| 3 Hours
Key Concept
Company Background — Pedal Pump Pty Ltd (PP): PP is a South African
company that manufactures and sells two pump products: SPump (small pump) and
BPump (big pump). The company uses an absorption costing system, values all
inventory items using the first-in-first-out (FIFO) method, and has a 31 Decem-
ber financial year-end. PP obtained a “compliant” compliance rating for a recent
compliance inspection after paying a “facilitation fee” — an ethically questionable act.
Page 2 of 27
, MAC3701 | Exam Revision Application of Management Accounting Techniques
Part A 20 marks | 36 minutes
(A-a) 20 marks
Question: Pedal Pump Pty Ltd (PP) is finalising budgets for the 2025 financial year and
budgeted to achieve a profit of R28.5 million. The cost accountant presented the following
calculation for the budgeted units to achieve the target profit:
Details per unit SPump (R) BPump (R)
Selling price 2 500 4 500
Less: Total prime costs (1 500) (2 700)
Less: Manufacturing overheads (230) (230)
Less: Selling & distribution costs (35) (35)
Contribution per unit 735 1 535
Additional information:
• Budgeted production: 60 000 SPump and 40 000 BPump units.
• Sales price: R2 500 (SPump) and R4 500 (BPump).
• Prime costs = 70% of selling price.
• Manufacturing overheads: FMO = R150/unit; VMO = R80/unit (both products).
• Total selling & distribution costs = R10 million; variable component = R35/unit.
• Fixed administrative costs = R12.5 million.
Required: Critically evaluate the cost accountant’s calculation of units required to achieve
the target profit, indicating whether you agree/disagree with each amount, correcting any
errors or omissions.
Answer: Critical evaluation of the cost accountant’s target-profit calculation:
Step 1 – Identify and correct the contribution per unit
The cost accountant deducted total manufacturing overheads (FMO + VMO = R150
+ R80 = R230) from the selling price to arrive at contribution. This is wrong. Under
the contribution approach (variable costing), fixed manufacturing overheads
(FMO) are period costs and must not be deducted from the selling price when
calculating contribution per unit. Only variable costs are deducted.
Page 3 of 27
