PART A

You are a Junior Management Accountant at Mask-it-up (Pty) Ltd,a "Proudly South African" companythat manufactures and supplies innovative 3D formed design masks that maximises airflow. The innovative 3D is comfortable to wear and easy for talking. The design prevents the mask from slipping down the face and for those that wear spectacles it prevents misting. Mask-it-up supplies both local and international retailers and its revenue mix is made up of 80% local and 20% foreign customers.

As people are encouraged not to use medical-grade masks, especially N95 masks and respirators, which are often reserved for medical use, the innovative 3D has become one of the preferred masks by the general public.

The Production Manager, Ms. Clean has approached you for some costing advice on one of theprojects called "Project Phila", a once-off order from one of the overseas customers that she intends to tender for. The overseas company wants the 3D masks to be personalised with its company name.

Ms Clean presented you with the project costs estimates as follows:

R

Direct Materials - Fabric 60 000

Direct Materials - Mask filters 120 000

Direct Labour 90 000

Supervision 30 000

Overheads 180 000

Total 480 000

Additional information:

1. Fabric will have to be ordered at the amount shown above. Mask filters are in stock having been purchased at the above price several months ago. There is no other use for the Mask filters and it would cost R26 250 to dispose them off if they are not used on this project.
2. The direct labour cost of R90000 relates to workers who will be transferred to Project Phila from another project. Replacement labour will have to be recruited for the other project at a cost of R105 000.
3. Supervision costs will be conducted by the existing staff within their normal duties.
4. Overheads consist of both specific and allocated, 45% of overheads represents the allocated portion.
5. The project will require the utilisation of a machine which will be purchased at a cost of R150000, the machine will then be sold at the end of the project for R75000.

The overseas supplier has indicated that it is prepared to pay a maximum of R450 000 for Project Phila. Mask-it-up has adopted a strategy to increase its footprint internationally to maximise its revenue.

Part B

PART B

Kako-lako (Pty) Ltd manufactures and sells three different distinct beverages. As part of the standards and budget setting process, the capacities of the product lines have to be considered. The following information is available for the 6 months from May 2021

Fuzz tea Kako-lako Mjojo-Combucha

Demand (units) 18 000 30000 24000

Contribution per unit R4.5 R3 R6

Required Labour hours. 1 hour 2.4 hours 1.8 hours

A maximum of 108 000 direct labour hours is available in normal working hours for the 6 months period. Employees only work during normal hours and the company does not have resources for its employees to work overtime.

Process costing information

Kako-lako uses a process costing system in the production of all three products.

Information below relates to the production process of product Fuzz Tea, for the month of January 2021

Units

opening work in progress (WIP) - 1 January: 60% complete 3000

closing work in progress (WIP) - 31 January: 65% complete 4500

New units put into production in January 2021 37500

Completed and transferred in january 2021 30000

Additional information

Cost information was as follows:

R

Opening WIP

raw materials 48 000

Conversion 29500

Added in January 2021

Raw Materials 106 600

Conversion 58 963

1. Normal losses are estimated at 3% of the inputs that reaches the wastage point.
2. Normal losses occur when the process is 60% complete.
3. Raw materials are added at the beginning of the process and conversion takes place evenly throughout the process.
4. Kako-lako uses the weighted average method of inventory valuation

Questions:

a) Using relevant costing principles,calculatea Project cost schedule for Project Phila. You should alsoprovidereasons for inclusion or exclusion of each cost item.

b) Calculatethe optimal production mix of Kako-lako (Pty) Ltd'sthree products for the six-month's period from May 2021. Round to two decimals throughout your calculation.

c) PrepareKako-lako'sbudgeted quantity statement for January 2021.