PART B (8 marks) LightsON (Pty) Ltd is bidding for a contract to supply LED lightbulbs to a manufacturing entity called No Lights Ltd. The management accountant wants to determine the total raw materials cost (broken down per inventory item) to manufacture the LED lightbulbs. A year ago, LightsON (Pty) Ltd purchased 500 grams of Material A for an order that was cancelled and for which, prior to this contracts possibility, LightsOn (Pty) Ltd had found no alternative use. The best offer the entity had so far is from a scrap metal dealer offering to acquire the entire 500 grams of Material A at a guaranteed price of R50 per gram. LightsON (Pty) Ltd however declined the offer from the scrap metal dealer as that would have resulted in a a loss, as the entity originally paid R100 per gram for Material A. Lights ON (Pty) Ltd is keen to use it for No Lights Ltds order. Materials B and D are in regular use. Material C, which costs R40 per unit, is not in regular use but could be used as a substitute for an inventory item in another job that is unrelated to the LED lightbulbs. Raw material requirements: Material type Quantity on hand Required Original purchase price Current purchase price Current resale value R R R A 500 grams (g) 500g 100/g 110/g 50/g B 200 grams (g) 1 000g 75/g 80/g 70/g C 300 units 100 units 25/unit 30/unit 50/unit D 500 grams (g) 200g 25/g 22/g 18/g E 0 meters (m) 200m 28/m 30/m n/a

65 HMAC330-1_FA1_Jul-Dec2023_V5_NM_20072023 Additional information: The management accountant derived the following total raw materials cost using the information above: Material type Calculations Total R A 500g x R100/g R50 000 B 1 000g x R70/g R70 000 C 100 units x R30/unit R3 000 D 200g x R18/g R3 600 E 200m x R30/m R6 000 TOTAL R132 600

REQUIRED: Using the relevant costing principles, critically discuss the calculation of the raw material costs per inventory item that was done by the management accountant. Support your answer with calculations where necessary. (8 marks)