FINAL ASSESSMENT $2022$: SCC$2301$

QUESTION $1$

$(55$ MARKS$)$

PART A

$(45$ MARKS$)$

Nestly Pty $($Ltd$)($hereafter referred to as "Nestly" or "the company"$)$ is a well$-$known company that specialises in manufacturing and selling various types of chocolates. The company was incorporated in $1992$ in the Gauteng Province. As the company grew, its manufacturing factories were then expanded to Limpopo, Kwazulu$-$Natal and Western Cape provinces. The company is well known for its chocolate candy bar that is branded, "Kat Kit". This is currently sold in sizes of $500$ grams $($ g $)$ and $1$ kilogram $($ kg $).$ The manufacturing process of these sizes of Kat Kit bars is the same and only differs during packaging in the packaging line. Nestly gets more profit from selling the $1$ kg Kat Kit bars than the $500$ g bars. Your boss has asked you to provide her with an updated cost information, and to determine the current net profit or loss for use in the decision$-$making process.

The Kat Kit candy bars requires the following ingredients for production: cocoa powder, condensed milk, wafer biscuits, and salt. You are hereby provided with the manufacturing process and cost information of the $1$ kg Kat Kit bar for the month ended $30$ November $2022$:

Cocoa powder process

The manufacturing process of Kat Kit begins with the roasting and crushing of cocoa beans to make cocoa powder. These beans are roasted until they are dark brown in pans by $3$ wage earners. After this, the roasted beans are then crushed in the smooth crushing machine until they are in a powder form.

Nestly bought $1500$ kgs of cocoa beans from Cracky Nuts $($Pty$)$ Ltd during November $2022.$ Cocoa beans are sold in $100$ kgs quantities to companies and in $1$ kg quantities to individuals. A $100$ kgs bag is sold at R$150$ whilst the $1$ kg bag is sold at R$25.$ All $1500$ kgs of cocoa beans were roasted and crushed into cocoa powder during the month. A normal loss allowance of $2\%$ is estimated to be incurred during the roasting and crushing process. These losses cannot be sold.

Each wage employee is paid a rate of R$550$ per $100$ kgs of cocoa beans roasted and crushed. These employees work together until all the cocoa beans are fully roasted.

The cost price of the smooth crusher machine was R$1157500$ and it was purchased in $2019.$ The machine is depreciated over a period of $5$ years.

Assume there was no opening stock nor opening work in progress for cocoa powder.

From history, each $100$ kgs of cocoa beans can be used to manufacture $125$ units of Kat Kit bars. NB: Consider the losses incurred.

Budgeted production of Kat Kit chocolate bars equate to the normal production as of November $2022.$

Nestly machinery are revalued in November each year. When the crushing machinery was revalued, the newly recalculated depreciation for the crushing machine amounted to R$210000$ per year.

Condensed milk

Condensed milk is used in the Kat Kit bar to sweeten and give a milk taste to the Kat Kit chocolate bar. Condensed milk is mainly bought from Prabhat $($Pty$)$ Ltd and in $80$ litres drum for R$2500$ per drum. One unit of a Kat Kit bar $(1kg)$ requires $500$ millilitres $($ml$)$ of condensed milk. Nestly bought a total of $35$ drums of condensed milk for the

$2$

month. Usage of the condensed milk was used as planned to the manufacturing Kat Kit chocolate bar. The remaining litres of condensed milk will be used in December $2022.$ There were no opening inventories of condensed milk at the beginning of the month

$3.$ Wafer biscuits

The Kat Kit bars are differentiated from other chocolate brands with the wafer biscuits that are used in manufacturing them. The biscuits are soft and smoothly crunchy. The biscuits are bought from Spheres Pty $($Ltd$)$ which is a big manufacturer of different types of biscuits. The biscuits are supplied in the specified cut sizes for the Kat Kit chocolate bars. Each $1$ kg unit of Kat kit bars uses $10$ wafer biscuits. During the month of November $2022,$ Nestly bought $500$ boxes of wafer biscuits for a cost of R$98630.$ Each box contains $500$ wafer biscuits pieces. There were no opening inventories of wafter biscuits at the beginning of the month.

Salt

Nestly uses a small amount of salt for its Kat Kit chocolate bars. Cost per unit for salt used has been estimated at R$0,23$ for each $1$ kg unit of Kat Kit.

Mixing, rolling, and cooling process

All the ingredients above $($except for the wafer biscuits$)$ are then mixed in a mixing machine until they are at the right desired texture. The wage employees referred to in $(1)$ above, inspect this process. After this, the mixed chocolate is then rolled into the wafer biscuits through the two$-$roller refiner machine. This machine produces Kat Kit chocolate bars which are then cooled using a cooling machine to bring them to room temperature. Total cost of the mixing, rolling and cooling machinery is R$1500000$ and it is depreciated at $10\%$ per annum. $60\%$ of usage of these machines relates to the production of $1$ kg Kat Kit and $40\%$