Question 1 12 Marks The following sales and cost data are provided: Direct materials used R150 000 Direct labour R200 000 Overheads (all indirect, 60% variable) R100 000 Selling and administration expenses (50% direct and 75% variable) R300 000 Required: Calculate the following costs: 1. Prime costs (2) 2. Conversion costs (2) 3. Product cost (3) 4. Period costs (1) 5. Variable production cost (2) 6. Total fixed costs (2)

Question 2 14 Marks Normal monthly production for a manufacturing company is 20 000 units. The following cost data is available: Costs Variable cost per unit Total budgeted cost Direct material R15 R300 000 Direct labour R30 R600 000 Manufacturing overheads R45 R975 000 Administration costs R225 000 ADDITIONAL INFORMATION Manufacturing overheads are made up of both a fixed and variable component. All administrative costs are fixed. The actual level of production was 27 000 units and the actual costs are as follows: R Direct materials 486 000 Direct labour 945 000 Manufacturing overheads 1 200 000 Administration costs 200 000 Required: 1. Prepare a flexible budget for 15 000 units. (4) 2. Prepare a performance report indicating whether the variance is favourable or unfavourable. (10) Question 3 6 Marks Pepper Industries manufactures a wide line of mugs which are sold to specialty gift stores. The sales manager has received a request to price a special order from a large consultancy offering to purchase 50 000 mugs that it plans to use for promotional purchases. The sales manager asked the factory accountant to develop an estimate of the cost to fill this order. The production manager advises that there is plenty of idle capacity to fill this order. The factory accountant replied by submitting Table 1 to assist with the decision. Table 1 ITEM Direct materials 50 000 @ R0,66 each R33 000 Direct labour 50 000 @ R0,23 each R11 500 Variable manufacturing overhead 50 000 @ R0,15 each R7 500 Fixed manufacturing overhead 50 000 @R0,10 each R5 000 Design costs R1 800 Shipping costs R3 600 Other administrative costs R1 500 Total order cost R63 900 ADDITIONAL INFORMATION All variable costs are incremental costs relating to this order. The charge for fixed manufacturing overhead is the standard fixed overhead amount that Pepper Industries allocates to all mugs it produces. The manufacturing overhead relates to factory equipment that is used to make the various products. It will not change in the short run. The customer has stated they do not need any designs on the product. The shipping costs are the estimated costs of shipping the completed product to the customer. The other administrative costs represent the cost that is added to each other to reflect fixed administrative costs at Pepper Industries that will not change in the short run. Required: Calculate the relevant cost for the special order. Question 4 8 Marks Required: Using the following information, determine the break-even value to assist management in their decision making: R Sales 120 000 Net profit 10 000 Fixed costs 50 000 Question 5 10 Marks The manager of Hayne Ltd is considering the replacement of some equipment. This equipment has zero book value but its current market value is R900. One possible alternative is to invest in new equipment, which costs R19 000. This new equipment would produce estimated annual operating cash savings of R6 250. The estimated useful life of the new equipment is four years. Hayne Ltd uses straight-line depreciation. The investment in the new equipment would require an additional investment in working capital of R1 500, which would be recovered after four years. If Hayne Ltd accepts this investment proposal, the disposal of the old equipment and the investment in the new equipment will take place on 31 December 20.1. The cash flows from the investment will occur during the calendar years 20.2 through 20.5. Required: Prepare a net present value analysis of Hayne Ltds equipment replacement decision. The company has a 4 per cent hurdle rate.