Page $2$ of $9$

MAC$3701$

Assessment $02/$S$2/2024$

QUESTION $1$

$(100$ Marks; $180$ Minutes$)$

The Company information below applies to Parts A$,$ B$,$ C$,$ D$,$ and E of assessment $02.$ The additional information provided in each Part only applies to that specific Part of the assessment $02.$

For each Part below, remember:

You must clearly show all your calculations in detail $($marks are awarded for calculations$)$;

Where necessary, indicate irrelevant amounts$/$adjustments with an R$0($nil$-$value$)$;

Round all your workings to two decimals, except where otherwise stated; and

Ignore time value of money and all taxation implications.

Company information

Pinatech $($Pty$)$ Ltd $("$Pina$"),$ based in Isando, Gauteng, has a male$-$dominated executive team and manufactures two types of premium laptop models: $14-$inch Deluxe and $16-$inch Elite laptops $($one laptop is equal to one unit$)$ for professionals and gamers. Their products are known for superior performance and quality; hence, their laptops carry an above$-$industry four$-$year warranty. The company has a strong brand reputation and a loyal customer base. The company has a December financial year end, uses an absorption costing system, and values all its inventories using the first$-$in$-$first$-$out $($FIFO$)$ method.

Pina's operations occur in two production stages, firstly the enclosure stage and then the assembly stage.

Enclosure stage

Using advanced machinery and semi$-$skilled labour, this stage combines aluminium and magnesium alloys to mould and produce high$-$end, durable laptop casings.

Assembly stage

During this stage, highly skilled technical labourers carefully install the main circuit board and advanced component sets into the enclosure.

Both production stages are complex and time$-$consuming and are managed by only one factory supervisor who monitors both operations and reports back to the production head. The company operates at only $75\%$ production capacity and has opportunities to sell laptop casings as an additional product line.

The company has been facing challenges from intense competition in a saturated market. Additionally, Pina relies on a global supply chain to source its critical raw materials, aluminium and magnesium. Recent geopolitical tensions and trade restrictions have led to delays and increased costs for these critical raw materials.

The company was recently awarded a City of Ekurhuleni tender to supply the various departments with laptops. Pina received this tender after sponsoring a charity event hosted by an influential city government official.

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Page $3$ of $9$

MAC$3701$

Assessment $02/$S$2/2024$

PART A

$(20$ Marks; $36$ Minutes$)$

During the $2023$ financial year, a standard costing system was in place, and the following information was extracted from Pina's actual and budgeted information for the financial year ending $31$ December $2023$:

$\backslash$table$[[$Details$,\backslash$table$[[$Deluxe$],[$R$]],\backslash$table$[[$Elite$],[$R$]]],[$Budgeted selling price per unit,R$38500,$R$45500],[$Budgeted contribution per unit,R$8400,$R$8700],[$Actual contribution per unit,R$8200,$R$8550],[$Budgeted gross profit per unit,R$6810,$R$7050],[$Actual gross profit per unit,R$6580,$R$6850]]$

There was no budgeted opening and closing inventory of any type.

Sales demand

Pina budgeted to sell $5200$ units and $2800$ units of Deluxe and Elite laptops, respectively. Production delays occurred due to a global shortage of aluminium and magnesium during the $2023$ financial year. Pina only managed to achieve $75\%$ of the budgeted Deluxe sales and total company sales of only $6500$ units. The actual selling price was equal to the budgeted selling price.

Production demand

The budgeted production was equal to the sales demand for both products. However, the actual production was $3850$ Deluxe and $2550$ Elite Laptops.

Aluminium and Magnesium raw materials

The following information was noted for raw materials used in the Enclosure stage:

$\backslash$table$[[$Raw materials,Standard cost card,$],[,,$Deluxe,Elite$],[$Aluminium$,,3$ kilograms $($kg$)$ @ R $45$ per kg$,3,5kg$ @ R $45$ per kg$],[$Magnesium$,$Purchased,$1$ kg @ R $53$ per kg$,1,5kg$ @ R $53$ per kg$],[,$Issued to production,$],[$Aluminium$,21500$ kg for R $1032000,11850$ kg$,9150$ kg$],[$Magnesium$,8500$ kg for R $467500,4150$ kg$,3850$ kg$]]$

Human resource information

Due to production delays, technical staff had to work overtime to meet the production budget. The budgeted and actual clock hours required to produce one Deluxe and Elite laptop were $1,25$ and $1,75$ clock hours, respectively, and the allowed idle time was $8\%.$ The standard clock hour rate per hour was R$350$ per clock hour. The wage records for December $2023$ indicate an actual work hour rate of R$364,58$ per work hour. The actual idle time for December $2023$ was $6\%.$ No changes were noted for semi$-$skilled labour.

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Page $4$ of $9$

MAC$3701$

Assessment $02/$S$2/2024$

PART A $($continued$)$

$\backslash$table$[[$REQUIRED: PART A$,],[\backslash$table$[[$For answering P