Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Business Study Resc X Managerial Account X Dashboard $ https://witscloud.sh x PDE Cheat sheets_.pdf. X PDE Paper 2_MBA_MFA_X + X C File | C:/Users/10101882/Documents/2022%20PERSONAL/WITS%202022/Financial%20Management%20Accountin... NE

image text in transcribedimage text in transcribed
Business Study Resc X Managerial Account X Dashboard $ https://witscloud.sh x PDE Cheat sheets_.pdf. X PDE Paper 2_MBA_MFA_X + X C File | C:/Users/10101882/Documents/2022%20PERSONAL/WITS%202022/Financial%20Management%20Accountin... NE 4 of 6 Q 215 QUESTION 3 (YELLOW BOOK) 25 MARKS You are the newly appointed management accountant of CoolAir (Pty) Lid ('CoolAir'), a manufacturer and distributor of air conditioners. CoolAir manufactures all its air conditioners at its premises in Midrand, Gauteng. CoolAir manufactures two types of air conditioners, the industrial air conditioner (IN020) and the household air conditioner (HH030). IN020 is a large air conditioner that is normally used at factories while HH030 is a smaller air conditioner used mainly for household purposes. Information relating to the budget period for the financial year ending 30 June 2018 is provided below. 1. The budgeted selling price of the IN020 and HH030 air conditioners is R4 000 and R2 250 respectively. CoolAir expects to sell a total of 7 800 air conditioners in the same ratio as the production ratio for the financial year ending 30 June 2018 2. The budgeted production volume is 6 000 units and 2 000 units of IN020 and HH030 respectively. CoolAir estimates that there will be no IN020 and HH030 air conditioners on hand as at 30 June 2017. The production process is set up such that there is no raw materials or work in progress on hand 3. The direct material cost of IN020 and HH030 air conditioners is R1 250 and R775 respectively. Each unit of IN020 and HH030 requires 6 and 3 direct labour hours respectively. Labour is a variable cost and the total labour cost estimated to be incurred during the 30 June 2018 financial year amounts to R2 520 000. 4. Fixed overhead costs represent the cost of electricity, salaries payable to factory managers, machine operators, engineers and packaging personnel and rental for the premises. It is the policy of CoolAir to allocate all fixed overhead costs using activity-based costing. The following activities (and cost drivers) have been identified as the major and relevant activity pools. Activity pool Notes Activity costs | Cost drivers Production 4.1 R2 000 000 Number of production batches Inspection 4.2 R1 568 000 Number of inspections Material handling 4.3 R1 508 000 Number of materials movement Total fixed overhead costs R5,076,000 4.1. The IN020 and HH030 air conditioners are produced in batches that contains 30 and 10 air conditioners respectively. 4.2. Every second batch of IN020 is inspected while only the fifth batch of HH030 is inspected. 4.3. The number of material movements per batch is 10 for IN020 while the number of material movements per batch of HH030 is 3. 5. Budgeted non-manufacturing costs amounts to R6 million and comprises administration, selling and distribution costs. The majority of these costs are fixed in nature other than for the commission payable to the sales team at a rate of 5% and 4% on the selling price for each IN020 and HH030 air conditioners sold respectively. 12 e W T ? 13:53 19 C O 2022/06/05Business Study Resc X Managerial Account X Dashboard https://witscloud.sh x PDE Cheat sheets_.pdf. X PDE Paper 2_MBA_MFA_X + X C File | C:/Users/10101882/Documents/2022%20PERSONAL/WITS%202022/Financial%20Management%20Accountin... NE 5 of 6 Q + 2 - D A T V REQUIRED Marks (a) Calculate the manufacturing cost per unit of the IN020 and HH030 air conditioners (i.e. product unit cost) that will be produced by CoolAir (Pty) Lid in the 30 June 2018 11 financial year assuming that CoolAir (Pty) Lid applies the activity-based costing (d) Determine the breakeven units that will be achieved by CoolAir (Pty) Ltd in the 11 financial year ending 30 June 2018 for the IN020 and HH030 air conditioners. (e) Calculate, the difference in profit (if any) that will be earned by CoolAir (Pty) Ltd if 3 variable costing system was used compared to if absorption costing was used TOTAL 25 12 Lo e w & di 13:53 ? 19 C 2022/06/05

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Fundamentals

Authors: John Wild

7th Edition

1260247864, 9781260247862

More Books

Students also viewed these Accounting questions

Question

2. Find five metaphors for communication.

Answered: 1 week ago