MAC3702 ASSIGNMENT 1 0F SEMESTER 2 OF
2023
QUESTION 1
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two
types of solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar
geysers. Letsatsi makes use of an absorption costing system and all types of
inventory are valued using the first-in-first-out method (FIFO). The following
information is available for the financial year ended 30 June 2023:
1. There was no actual and budgeted opening inventory of any type for the 2023 financial
year.
2. No actual or budgeted normal material losses occurred in the production process.
3. Letsatsi’s fixed manufacturing overheads (FMO) are allocated based on the budgeted
direct labour clock hours. The total budgeted FMO was R655 000 per month and the total
actual FMO for the year was R9 200 000.
4. The budgeted other fixed administrative costs for the division were R2 358 000 per
annum and the actual other fixed administrative costs were R2 400 000.
The budgeted fixed manufacturing overheads allocation rate per direct labour clock hour for the 2023
financial year is:
Solution
Calculation of Total direct labour clock hours
Hours
LowP 56 000
HighP 75 000
131 000
,Fixed manufacturing overheads allocation rate per direct labour clock hour
=
=
=
QUESTION 2
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two
types of solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar
geysers. Letsatsi makes use of an absorption costing system and all types of
inventory are valued using the first-in-first-out method (FIFO). The following
information is available for the financial year ended 30 June 2023:
1. There was no actual and budgeted opening inventory of any type for the 2023
financial year.
2. No actual or budgeted normal material losses occurred in the production process.
3. Letsatsi’s fixed manufacturing overheads (FMO) are allocated based on the budgeted
direct labour clock hours. The total budgeted FMO was R655 000 per month and the
total actual FMO for the year was R9 200 000.
, 4. The budgeted other fixed administrative costs for the division were R2 358 000 per
annum and the actual other fixed administrative costs were R2 400 000.
For question 2 only assume the following:
i. The budgeted fixed manufacturing overheads (FMO) allocation rate per direct
labour clock is R80 per hour.
The total FMO amount included in costs of sales for the 2023 financial year is?
Solution
R
Allocated overheads: LowP 3 600 000
Allocated overheads: HighP 7 072 000
Total allocated overheads 10 672 000
QUESTION 3
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two
types of solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar
geysers. Letsatsi makes use of an absorption costing system and all types of
inventory are valued using the first-in-first-out method (FIFO). The following
information is available for the financial year ended 30 June 2023:
2023
QUESTION 1
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two
types of solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar
geysers. Letsatsi makes use of an absorption costing system and all types of
inventory are valued using the first-in-first-out method (FIFO). The following
information is available for the financial year ended 30 June 2023:
1. There was no actual and budgeted opening inventory of any type for the 2023 financial
year.
2. No actual or budgeted normal material losses occurred in the production process.
3. Letsatsi’s fixed manufacturing overheads (FMO) are allocated based on the budgeted
direct labour clock hours. The total budgeted FMO was R655 000 per month and the total
actual FMO for the year was R9 200 000.
4. The budgeted other fixed administrative costs for the division were R2 358 000 per
annum and the actual other fixed administrative costs were R2 400 000.
The budgeted fixed manufacturing overheads allocation rate per direct labour clock hour for the 2023
financial year is:
Solution
Calculation of Total direct labour clock hours
Hours
LowP 56 000
HighP 75 000
131 000
,Fixed manufacturing overheads allocation rate per direct labour clock hour
=
=
=
QUESTION 2
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two
types of solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar
geysers. Letsatsi makes use of an absorption costing system and all types of
inventory are valued using the first-in-first-out method (FIFO). The following
information is available for the financial year ended 30 June 2023:
1. There was no actual and budgeted opening inventory of any type for the 2023
financial year.
2. No actual or budgeted normal material losses occurred in the production process.
3. Letsatsi’s fixed manufacturing overheads (FMO) are allocated based on the budgeted
direct labour clock hours. The total budgeted FMO was R655 000 per month and the
total actual FMO for the year was R9 200 000.
, 4. The budgeted other fixed administrative costs for the division were R2 358 000 per
annum and the actual other fixed administrative costs were R2 400 000.
For question 2 only assume the following:
i. The budgeted fixed manufacturing overheads (FMO) allocation rate per direct
labour clock is R80 per hour.
The total FMO amount included in costs of sales for the 2023 financial year is?
Solution
R
Allocated overheads: LowP 3 600 000
Allocated overheads: HighP 7 072 000
Total allocated overheads 10 672 000
QUESTION 3
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two
types of solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar
geysers. Letsatsi makes use of an absorption costing system and all types of
inventory are valued using the first-in-first-out method (FIFO). The following
information is available for the financial year ended 30 June 2023:
