MAC2601 Assignment 2 Solutions First Semester 2023

lOMoAR cPSD| 26961842




MAC2601
Assignment
2 Solutions
First
Semester
2023

, lOMoAR cPSD| 26961842




QUESTION 1

a) Using the traditional absorption costing method,

I. The total product cost for each product type
Mild Hot Extra

Direct materials (80 X 1000) (100 X 2000) (150 X 3000)

=R80 000 =R200 000 =R450 000

Direct labour (20 X1000) = (25 X 2000) (30 X 3000)

R20 000 =R50 000 =R90 000

Manufacturing R48 461.54 R129 230.77 R242 307.69
overheads


Total R148 464.54 R379 230.77 R782 307.69

Workings for manufacturing overheads

Overheard rate= budgeted overheard/ budgeted machine hours = 420

000/ 26 000 = R16.15 per hour

Applied overheads = actual machine hours x overheard rate per hour

Mild: (3 X 1000) X 16.15 = R48 461.54

Hot: (4 X 2000) X 16.15 = R129 230.77

Extra: (5 X3000) X 16.15 = R242 307.69


II. Product cost per unit of each product




1

, lOMoAR cPSD| 26961842




Mild Hot External

R R R

Direct materials 80 100 150

Direct labour 20 25 30

Manufacturing (3 X 16.15) (4 X 16.15) (5 X 16.15) =
overheads
=48.46 =64.62 80.77

Total 148.46 189.62 260.77




b) The product cost per unit of each product using

ABC costing method

Step 1: Cost driver rates
Machinery Setup Stores Inspection Material
receiving issuing**


Amount R250 000 R50 R60 000 R20 000 R40 000
divided by
000

Number of 26 000
machine
hours



Number of 50
set ups




2

, lOMoAR cPSD| 26961842




Number of 20
inspections


Number of 160
requests


Orders from 80
***


Cost driver 9.62 1 000 375 1000 500
rate (2dp)




Step 2: Allocation of overheads
Mild Hot Extra hot

R R R

Machinery 3000 X 8000 X 15 000 X

9.61538 9.61538 9.61538

=28 846 = 76 923 = 144 231

Setup 20 000 20 000 10 000

Stores receiving 30 000 18 750 11 250

Inspection 5 000 6 000 9 000

Materials 10 000 15 000 15 000

Total 93 846 136 673 189 481




3