MAC2601 REVISION PACK 2017/2020

EXAM Question 1 (20 marks, 24 minutes) Gupta Gate (Pty) Ltd manufactures and sells bullet proof vests. The following information is available for 2013 (actual) and 2014 (budget). Production (units) Sales (units) Opening inventory (Beginning of 2013) (units) 1 500 R R Variable cost per unit: Manufacturing 25 28 Direct labour 10 15 Selling cost 5 5.5 40 38.5 Fixed costs: Manufacturing overheads Selling and administrative costs Additional information: Selling price per unit per bullet proof vest is R125 for 2013 and R135 for 2014 1.1 Calculate the value of closing stock at the end of 2013 for financial accounting purposes i.e. for IFRS purposes a) R80 000 b) R59 500 c) R80 750 d) R75 800 1.2 Calculate the value of closing stock at the end of 2013 using the direct costing method. a) R50 000 b) R68 000 c) R95 500 d) R59 500 1.3 Calculate net profit before tax using the direct costing method (FIFO) (2014 period) a) R163 250 b) R162 350 c) R188 500 d) R 229 850 [TURN OVER]= You have been provided with the following statements regarding absorption costing method which is used for IFRS purposes Absorption costing is superior to variable costing method and results in continuous growth of the company Absorption costing method includes both variable and fixed manufacturing costs in the product cost Absorption costing may be used to manage and control effectively selling and administration costs of the company When absorption costing method is used, budgeted fixed manufacturing costs are recovered on the basis of budgeted number of units manufactured during the period or budgeted total production hours Indicate which of the following statements are true: = (i) and (iii) = (i) and (ii) = (ii) and (iv) (i) and (iv) 1.2 Whilst sitting at home preparing for MAC2601 exam you received a call from a fellow student asking you to verify the following statements regarding direct costing terminologies: = Fixed cost does not remain constant in total regardless of changes in the level of activity or volume within the relevant range and in a specific time frame = Conversion cost is the total costs incurred when converting raw material into finished products (iii) The high low method is predominantly used by big companies listed on the JSE (Johannesburg Stock Exchange) (iv) Administrative costs are costs incurred in directing and controlling the organisation Indicate which of the following statements are true: (i) i) and (ii) (ii) ii) and (iv) (iii) i) and (iii) (iv) i) and (iv) The following information can be used to answer question 1.6 and 1.7. Boom Ltd sells African herbs that are patented under their name. The company has the following information available. R Sales price per unit 15,00 Direct material per unit 7,50 Direct labour per unit 5,00 Fixed admin and overhead cost 30 000 Current monthly profit 12 000