AAM3692 Assignment 1 2021 Question 1 (26 Marks) Table Makers CC (TM), is a company that manufactures and sells large size tables. Such large size tables are mainly used in the offices of the executives. A table is sold for N$800. Provided below is the companys data for 2020: Manufacturing costs: (N$) Direct materials per unit 240 Direct labour per unit 120 Variable manufacturing overhead per unit 40 Fixed manufacturing overhead per annum 1 200 000 Non-manufacturing costs: Variable selling administrative per unit 80 Fixed selling administrative per annum 1 800 000 Additional information: There was neither opening inventory nor any work in progress at the beginning of the year. A total of 10 000 tables were produced during 2020 of which 90% were sold. REQUIRED: MARKS 1.1 Under variable costing method, determine the production cost per table. 5 1.2 Prepare a profit statement for the year under the variable (marginal) costing method. 9 1.3 Prepare a profit statement for the year under the absorption costing method. 8 1.4 Prepare a reconciliation schedule to show why there is a difference in profits. 4 TOTAL MARKS 26 Question 2 (27 Marks) Though COVID-19 has affected the majority of companies and individuals worldwide, to some companies; the pandemic is regarded as a window of business opportunity. Simox Pharmaceuticals Cc is one of the few Namibian companies that are locally manufacturing hand sanitizers for use in the fight of COVID-19. The hand sanitizers are produced in masses through a process costing system. The following information was extracted from the companys records for the month ended 31 August 2020: FACULTY OF ECONOMIC & MANAGEMENT SCIENCES Page 11 of 16 Description Units N$ Work in process 1 July 2020 2 000 - Material 100% complete - 50 000 - Conversion 80% - 45 000 During the month: Units introduced to production 8 000 - Work in process 31 August 2020 - Material 100% - Conversion 40% complete 500 - 80 000 60 600 Normal loss 5% of units that reached the inspection point - Additional information: Materials are added at the beginning of the process. Losses are detected when units are 80% complete. Conversion costs are incurred evenly during the period. 90% of units to account for were completed and transferred out during August 2020. Losses have no scrap value. The company uses the FIFO method in valuing its inventory. Required: Prepare the following for the year ended 30 September 2016: Marks 2.1. Physical units schedule 2 2.2. Production schedule clearly showing the equivalent units 6 2.3. Unit cost schedule 5 2.4. Cost appropriation statement 13 2.5. Between the abnormal loss and normal loss, which one should not be shown as a separate line item in the statement of profit and loss, and why? 1 TOTAL MARKS 27 Question 3 (17 Marks) Omega Oil Refinery manufactures vegetable oil from sun-flower plants and refines the Crude vegetable oil. The refining process results in four products at the split off: Crude Sweet, Crude Vigar, Crude Chilly and Fibra. Fibra is fully processed at the split off. Crude Sweet, Crude Vigar, and Crude Chilly can be individually be further refined into Sun Sweet, Sun Vigar and Sun Chilly respectively. The joint costs of crushing and processing sunflower to crude vegetable oil was N$ 2 100 000 Omega Refinery had no beginning and ending inventories. FACULTY OF ECONOMIC & MANAGEMENT SCIENCES Page 12 of 16 Omega Refinery has the option of selling all four products at the split off point. This alternative would yield the following sales for October 2020 production. The following data relates to sales of the refined products in October 2020: Products Further process costs to make super products N$ Sales N$ Sun Sweet 4 000 000 6 000 000 Sun Vigar 1 800 000 2 000 000 Sun Chilly 1 800 000 2 800 000 REQUIRED: MARKS 3.1 Allocate joint costs according to the physical measure method. 10 3.2 Determine whether the entity should process Crude Vigar into Sun Vigar. 7 TOTAL MARKS 17 Total assignment 1: 70 marks Products N$ Crude Sweet @N$10 each 1 000 000 Crude Vigar @N$12 each 600 000 Crude Chilly @N$7 each 1 400 000 Fibra @N$20 each 1 000 000 FACULTY OF ECONOMIC & MANAGEMENT SCIENCES Page 13 of 16 Assignment 2 Question 1 (25 Marks) Green Enterprises Ltd is preparing to set up a new business on the first of January 2021 to manufacture a single product. Below is the sales budget for the company for the first 6 months of 2021. Sales Budget January February March April May June Sales Unit 8 000 8 500 10 000 11 000 11 500 10 500 Sales Revenue 240 000 255 000 300 000 330 000 345 000 315 000 Additional Information; 1. The Cash collections patterns from sales is expected to be as follows: (a) Cash Customers 30% of sales revenue will be for immediate cash (b) Credit Customers 70% of sales revenue will be from credit customers. These debtors will pay their bills, 50% in the month after sales and the reminder in the second month after sales. 2. Stocks of finished goods are maintained 60% of the following months sales requirement, and the budgeted cost of a unit of finished goods is valued at N$ 20. 3. The product requires 4 kg of material X which cost N$ 1.5 per kg, it is expected that this price will increase with five cents from April. 4. One month`s credit is received from suppliers. 5. Stock of raw materials sufficient for 10% of the following month`s requirement in kgs are held at the end of each month. 6. One month`s credit is received from suppliers. 7. Expenses of the business will be settled as follows; (a) Expected Costs Wages N$ 20 000 per month payable as incurred. Variable Overheads of N$ 5 per Unit is payable as incurred. (b) There will be an Equipment to be purchased on 01 January 2021 it cost N$ 30 000, this equipment is expected to have a useful life of 5 years. To finance this purchase, a loan of N$ 24 000 will be secured from Development Bank of Namibia at 10% per FACULTY OF ECONOMIC & MANAGEMENT SCIENCES Page 14 of 16 annum. Interest is payable monthly, but capital loan repayment will not commence until July 2021. REQUIRED: Marks 1.1. Prepare a production budget for the first four months of 2021 4 1.2. Prepare a material purchases budget for the first four months of 2021 (both in units and N$) 8 1.3. Prepare a budgeted Trading Profit and Loss Account for the four months ending April 2021 13 TOTAL MARKS 25 Question 2 (22 Marks) RU Limited operates a system of standard costing in respect of one its products which is manufactured within a single cost centre. The standard price of material is N$20 per litre. The standard wage rate is N$ 12 per hour and 5 hours are allowed to produce on unit Fixed production overhead is absorbed at the rate of 100% of wages cost. During the month of September 2020 the following took place: N$ Actual price (paid for materials purchased) 19.50 per litre Total direct wages cost 156 000 Fixed production overhead 158 000 Variances N$ Type Favour (F) Unfavourable (U) Direct material price 80 000 Direct material usage 5 000 Direct labour rate 5 760 Direct labour efficiency 2 760 Fixed production overhead expenditure 8 000 REQUIRED Marks 2.1 Budgeted output in units 2 2.2 Raw material purchased in litres 4 2.3 What is the standard quantity allowed for production? 4 2.4 Actual units produced 4 2.5 Actual hours worked 4 2.6 Actual Wage rate per hour 4 FACULTY OF ECONOMIC & MANAGEMENT SCIENCES Page 15 of 16 Total 22 Question 3 (25 Marks) The Plantd Companys budgeted sales for the first quarter of 2020 are as follows: N$ January 400 000 February 320 000 March 480 000 Total 1 200 000 Credit sales are normally collected as follows: Percent (%) In the month of sale 50 The month following the sale 30 The second month following the month of the sale 20 Total 100 The firms beginning balance of accounts receivable is N$150 000 and is composed of the following: N$ From December 2019 sales 100 000 From November 2019 sales 50 000 Total 150 000 The company offers a 2% cash discount to its wholesale customers who pay their bills within the month of sale. REQUIRED: MARKS 3.1 What is a cash budget? 1 3.2 Compute the amount of sales for November and December. 4 3.3 Prepare a cash budget of cash collections for each month of the first quarter of 2020 and a total for the quarter. 13 3.4 Calculate the balance of accounts receivable at March 31, 2020. 3 3.5 Name four (4) benefits for the company of using a cash budget. 4 FACULTY OF ECONOMIC & MANAGEMENT SCIENCES Page 16 of 16 TOTAL MARKS 25 Question 4 (10 Marks) NamBank has identified business opportunities in two SADC markets, a research was commissioned and following data were produced. Angola Botswana Income expected N$ 1.7 mil N$ 1.2 mil It is expected that NamBank would have to make initial investment of N$ 11 mil & N$ 6 mill with respect to Angola and Botswana. The companys overall required return on its investments is 16%. REQUIRED: Marks 4.1. Define the term Residual Income and why it may be a better measure of performance than Return on Investment. 4 4.2. Indicate in which business environments it may be more appropriate for a successful divisionalization. 1 4.3. Using the Residual Income method, advice NamBank which investment to pursue on. 5 TOTAL MARKS 10 Total assignment 2: 82 marks