please assist with Q3&4 urgently

QUESTION 3 You are the business development manager of Smooth Foundries Ltd and are engaged in considering the plans for the company for the financial year ending 30 June 2022 (1 July 2021 to 30 June 2022). The sales manager expects to achieve 10 000 tons of widget castings at R250 per ton, but in his budget, the production manager tells you that, according to the design specification capabilities of his machines, only 8 000 tons of output will be possible. Consequently, you prepared the following budget based on 8 000 tons for the next financial year ending 30 June 2022: 2 000 000 1 800 000 300 000 1 200 000 Budget for the 30 June 2022 Sales (8 000 tons at R250 per ton) Expenses Direct material (all variable) Direct labour (all variable) (15 000 hours x R80 per hour) Manufacturing overheads (50% fixed) Administration overheads (all fixed) Selling & distribution costs (80% fixed) Profit before tax 140 000 . 60 000 . 100 000 e 200 000 Smooth Foundries Ltd does not keep any stock and produces only enough to meet the sales. The production manager suggests two ways in which output could be increased to 10 000 tons: Alternative 1: Subcontract the production of 2 000 tons to a competitor at a price of R205 per ton. Alternative 2: Produce the extra 2 000 tons by working an additional shift (3 200 extra direct labour hours at R100 per hour). It is hoped that there would be no fixed production overhead costs, but the plant would then operate beyond its designed capacity. In both alternatives, non-manufacturing fixed overhead costs would increase by R10 000 and R20 000 for the administration and selling & distribution costs respectively. REQUIRED Marks (a) Prepare budgeted income statements to be expected from each of the two suggested ways of increasing production using the absorption costing method. Hint: Each budget must be for 2 000 tons (not for full 10 000 tons) using the layout below. Sub-contract Additional shift 8 (b) Discuss, with reasons, which of the two alternatives should be implemented. 7 5 (c) Prepare a revised budgeted income statement (based on your choice in (b) above) for Smooth Foundries Ltd for the financial year ending 30 June 2022 using the variable costing method. Hint: the budget must be for 10 000 tons. 30 MARKS QUESTION 4 Thesele Ltd produces cutlery sets out of high-quality wood and steel. The company makes a standard and a deluxe cutlery set. These sets are sold to retail department stores throughout the country. Thesele Ltd does not have any opening or closing inventory of cutlery sets, work-in-progress or raw materials. The management accountant provided you with the financial information for each of the cutlery sets for the month ended 31 May 2021 in the table below: Financial information Standard Deluxe Total R400.00 R600.00 R240.00 R300.00 R80.00 R100.00 Selling price per set Variable expenses per set Direct fixed costs per set Fixed indirect costs per set, split as follows: Packaging material Receipt and inspection R756 000 R108 000 Storage R66 000 Sales and production (units) 9 000 3 000 Fixed indirect costs are currently allocated to the cutlery sets using machine hours. It takes 2 machine hours and 3 machine hours to produce a standard and a deluxe cutlery set respectively. Packaging materials are used in re-packing each set for both standard and deluxe cutlery. The total packaging material cost can be allocated to the standard and deluxe cutlery in the ratio of 1:2 respectively. This ratio is linked to the relative luxury of the cutlery for each type of a set. Studies have revealed that the luxuries of different goods affect the receipt and inspection time needed for the products for each type of cutlery set. Storage required is related to the average size of the basic incoming product units from each type of cutlery set. The relevant requirements per set of the cutlery type have been evaluated as follows: Standard Deluxe Receipt and inspection (minutes) Storage (square metres) 5 15 0.3 0.2 Forecasts for June, July and August 2021 Thesele Ltd received a special order of 3 000 deluxe cutlery sets for R650.00 per set from a competitor two days ago. The competitor's factory was broken into and cutlery sets stolen; as a result, it is unable to meet customer demand whilst producing new sets. Thesele Ltd's estimated production and sales of standard cutlery sets has been reduced in order to fulfil the special order during this month (June). The competitor paid a deposit of 50% of the cost and the balance is payable in two equal monthly instalments commencing in July. Expected sales and production for June, July and August are as follows: Standard Deluxe 4 000 6 000 June (including the special order of deluxe cutlery sets) July August 9 000 3 000 9 450 3 300 Eighty percent of the sales (excluding the special orders) are on credit and experience shows that 40% of a month's credit sales are collected in the month of the sale, 35% are collected in the month following the sale and 25% are collected in the second month following the sale. REQUIRED Marks (a) Calculate the fixed indirect costs per unit of Thesele Ltd's products (standard and deluxe cutlery sets) when activity-based costing is applied in allocating fixed indirect costs to products during May 2021. 7 (b) Discuss if it would be worth it for Thesele Ltd to introduce activity-based costing versus the traditional allocation method currently used. Support your answer with calculations. 8 (c) Calculate the breakeven units for Thesele Ltd for the month ended 30 June 2021 using the weighted average contribution method. 6 (d) Discuss, with reasons, if the July 2021 breakeven units for Thesele Ltd will increase or decrease as compared to the June 2021 breakeven units. Calculation of the July breakeven units or related profits is not required. 4 (e) Prepare the debtors collection schedule for Thesele Ltd for July and August 2021. TOTAL 5 30