ACCOUNTING FOR MANAGERS Question 1 10 MARKS Classify the following costs incurred by a step railing manufacturing company as direct materials, direct labour, factory overhead, or period costs: a. Wages paid to production workers b. Utilities in the office c. Depreciation on machinery and plant d. Steel e. Accountant's salary f. Rent on factory building g. Rent on office equipment h. Maintenance workers' wages i. Utilities in the plant j. Maintenance on office equipment Question 2 25 MARKS Supply the missing data in each independent case. Case 1 Case 2 Case 3 Case 4 Case 5 Unit sales 700 300 ? ? ? Sales revenue R42 000 ? ? R58 000 R40 000 Variable cost per unit R 45 R 1 R 15 ? ? Contribution Margin ? R1 200 ? ? R10 000 Fixed costs R7 500 ? R60 000 ? ? Operating income ? R 100 ? ? ? Unit contribution margin ? ? ? R 1 R 2 Break-even point (units) ? ? 5 000 30 000 ? Margin of Safety ? ? 1 000 -1 000 600 Question 3 15 MARKS Explain your understanding of opportunity cost by addressing the following: i. What is an opportunity cost? (2) ii. Under what circumstances are opportunity costs relevant to a decision? (4) iii. Construct an example of an opportunity cost. (5) iv. Briefly discuss why you think financial reports for investors and managerial reports for managers may or may not differ in their treatment of opportunity costs. (4) Question 4 20 MARKS Solo Company manufactures 20 000 components per year. The manufacturing cost per unit of the components is as follows: Direct materials R10 Direct labour 14 Variable overhead 6 Fixed overhead 8 Total unit cost R38 Assume that the fixed overhead reflects the cost of Solo's manufacturing facility. This facility cannot be used for any other purpose. An outside supplier has offered to sell the component to Solo for R32. Requirement: i. What is the effect on income if Solo purchases the component from the outside supplier? (10) ii. Assume that Solo can avoid R50,000 of the total fixed overhead costs if it purchases the components. Now, what is the effect on income if Solo purchases the component from the outside supplier? (10) Question 5 15 MARKS Answer the following questions relating to the Balanced Scorecard: a) Why does the balanced score card differ from company to company? b) Whose responsibility is the implementation? c) Describe the basic features of balanced score card. Question 6 15 MARKS Buhlle Company (Pty) Ltd has put together the following data in order to complete their operating budget for the second quarter of 2019: April May June July Sales (units) 73 200 68 900 65 400 67 300 Additional information: Company policy requires 60% of the following months sales (in units) be in ending inventory. This policy was met in March. It takes 2.5 hours of direct labour to produce one unit. The average wage cost is R14. Variable overhead rate is R6 per direct labour hour, and fixed overhead is R15 000 per month. Required: 1. Prepare a production budget for April, May and June and the quarter in total. (5) 2. Prepare a direct labour budget for April, May and June and the quarter in total. (5) 3. Prepare an overhead budget for April, May and June and the quarter in total.