Management accounting 1B.clear and full answers.

Question 2 Falesha Ltd was incorporated in 2010 after the owners, Mr Fae and Ms Letisha decided to venture into business taking advantage of the soccer world cup that was hosted by South Africa. The company makes and sells a hygiene soap (Hygiene Q) that is package and sold in 20 litre containers. The following information relates to the standard material requirements of Hygiene Q: Quantity litres 12 8 Pure lye Fragrance oils Price per litre N$ 40 32 The company has budgeted to pay its direct labour at rate of N$10 per hour. One 20 Litre container of Hygiene Q takes 20 standard direct labour hours to produce. The company operates in a semi just in time environment therefore does not keep inventories of finished goods. This means all units produced will be sold. The only inventory kept is that of materials since the suppliers require a longer lead time to deliver. The standard selling price of one 20 litre container of Hygiene Q is N$1 250 and the budgeted quantities to be produced at a given time are 2 400 containers. Production is spread evenly throughout the year. It is company policy to allocate fixed manufacturing overheads based on direct labour hours. The budgeted fixed manufacturing overheads were N$288 000 and were incurred evenly throughout the year. The following information relates to the actual activities that took place in October 2020: N$ NS Sales (220 units) 264 000 Cost of sales 227 400 Direct material used 159 000 Direct wages 45 400 Fixed production overhead 23 000 Gross profit 36 600 Administration costs 13 000 Selling and distribution costs 8 000 21 000 Net profit 15 600 The following table shows the opening and closing inventories of materials for the month of October. There was no change in material prices for the period. 1 October 30 October litres litres Pure lye 680 1 180 Fragrance oils 450 350 Page 15 of 17 Pure lye purchases were 3 000 litres at N$42 per litre. Fragrance oils purchases were 1700 litres at N$30 per litre. It is Falesha Ltd.'s policy to calculate material price variances based on units issued to production and not units purchased. N$45 400 was paid for direct labour in the month of October and 4 600 hours of direct labour were recorded for the month. Requirement Mark Sub- Total total 3 3 Determine the standard gross profit from selling one 20 litre container 1.1 of Hygiene Q. Your answer should show the standard production cost per one 20 Litre container, standard selling price and standard gross profit per one 20 litre container. Calculate all the relevant variances (sales and production cost 1.2 variances) assuming that Falesha Ltd does not calculate mix and yield variances. Reconcile the budgeted gross profit to actual gross profit using the variances calculated in 1.2 above. NB: Where applicable, please show all workings Total 10 13 1.3 2 15 15 Question 2 Falesha Ltd was incorporated in 2010 after the owners, Mr Fae and Ms Letisha decided to venture into business taking advantage of the soccer world cup that was hosted by South Africa. The company makes and sells a hygiene soap (Hygiene Q) that is package and sold in 20 litre containers. The following information relates to the standard material requirements of Hygiene Q: Quantity litres 12 8 Pure lye Fragrance oils Price per litre N$ 40 32 The company has budgeted to pay its direct labour at rate of N$10 per hour. One 20 Litre container of Hygiene Q takes 20 standard direct labour hours to produce. The company operates in a semi just in time environment therefore does not keep inventories of finished goods. This means all units produced will be sold. The only inventory kept is that of materials since the suppliers require a longer lead time to deliver. The standard selling price of one 20 litre container of Hygiene Q is N$1 250 and the budgeted quantities to be produced at a given time are 2 400 containers. Production is spread evenly throughout the year. It is company policy to allocate fixed manufacturing overheads based on direct labour hours. The budgeted fixed manufacturing overheads were N$288 000 and were incurred evenly throughout the year. The following information relates to the actual activities that took place in October 2020: N$ NS Sales (220 units) 264 000 Cost of sales 227 400 Direct material used 159 000 Direct wages 45 400 Fixed production overhead 23 000 Gross profit 36 600 Administration costs 13 000 Selling and distribution costs 8 000 21 000 Net profit 15 600 The following table shows the opening and closing inventories of materials for the month of October. There was no change in material prices for the period. 1 October 30 October litres litres Pure lye 680 1 180 Fragrance oils 450 350 Page 15 of 17 Pure lye purchases were 3 000 litres at N$42 per litre. Fragrance oils purchases were 1700 litres at N$30 per litre. It is Falesha Ltd.'s policy to calculate material price variances based on units issued to production and not units purchased. N$45 400 was paid for direct labour in the month of October and 4 600 hours of direct labour were recorded for the month. Requirement Mark Sub- Total total 3 3 Determine the standard gross profit from selling one 20 litre container 1.1 of Hygiene Q. Your answer should show the standard production cost per one 20 Litre container, standard selling price and standard gross profit per one 20 litre container. Calculate all the relevant variances (sales and production cost 1.2 variances) assuming that Falesha Ltd does not calculate mix and yield variances. Reconcile the budgeted gross profit to actual gross profit using the variances calculated in 1.2 above. NB: Where applicable, please show all workings Total 10 13 1.3 2 15 15