Application of Management Accounting Techniques (HMAC330-1)

Key data for September 2023 were as follows: 1. 60000 Standard and 20000 Top-notch tablets were produced and delivered to customers. 2. The Standard and Top-notch tablets are manufactured in production runs of 1000 units and 500 units respectively. Actual machine hour utilisation per production run during September 2023 was: Production overhead costs allocated and apportioned to each production cost centre during September 2023 were: Direct costs incurred during September 2023 were: The management consultants have recommended that Gadgets (Pty) Ltd establish the following four cost pools: The X and Y production cost centres would in this way be combined into one cost pool. You establish that the activity levels for the respective products and the total overhead allocation for each cost pool during September 2023 would have been as follows: REQUIRED: 2.1. Calculate the selling price per unit for each tablet using the existing method. (12 marks) 2.2. Calculate the selling price per unit for each tablet using the proposed ABC method. You may assume that the 50% markup still applies. (14 marks) 2.3. State whether or not Gadgets (Pty) Ltd should implement the ABC system. Provide reasons to support the answer. (3 marks) Round to two decimals where applicable. QUESTION 2 (29 marks) Gadgets (Pty) Ltd makes two types of tablets - 'Top-notch' and 'Standard'. The Topnotch' is personalised and has higher quality hardware. The 'Standard' is generic and has standard hardware. The tablets are manufactured in a two-stage production process, firstly Stage X, followed by Stage Y. Gadgets (Pty) Ltd currently uses a departmental overhead recovery rate based on machine hours for each production cost centre. Factory overheads are allocated to the products as the product moves through each production cost centre. A 50% markup is applied to the product cost to arrive at the final selling price. The market for tablets has become very competitive, with price-cutting tactics commonplace in the industry. Senior management recently appointed a team of external management consultants to review the entity's operations and one of the consultants' recommendations was that Gadgets (Pty) Ltd implement an activitybased costing ( ABC ") system. The consultants' report concluded stating that: "The benefits of ABC are enormous. One of its key benefits is that it results in accurate product costing and from there, accurate profit measurement of products." The financial director has asked you to review the consultants' recommendations and undertake a comparative analysis between the existing costing method and the proposed costing method using the September 2023 figures to illustrate your analysis