QUESTION 1 (25 MARKS) Greengage Limited produces and sells a revolutionary health product which promises to "make you look and feel 10 years younger". The newly appointed management accountant, Jacob Ntuli, feels rather overwhelmed in his new position, and has approached you for assistance. Amongst other things, he is not sure what costing system to use (variable or absorption). Jacob presented you with the following information for the period ended 30 June 2022 : - The overhead absorption rates are based upon normal activity of 720000 units per period. - During the period just ended 780000 units of the health product were produced, and 690000 units were sold at Rg per unit. - At the beginning of the period 120000 units were in stock which were valued at the budgeted costs shown above. - Actual costs incurred for the period were as per budget. After presenting you with the above information, Jacob mentioned the following to you: 'My new position requires me to work overtime in addition to my normal working hours - often I have to work with control accounts that are setup within the cost accounting system which I thirk are unnecessary and waste my time as they serve no purpose. No control accounts would equal no overtime at work and more family time at homel" Required: 1. Assuming Greengage Limited implemented an absorption costing system, calculate the fixed production overhead absorbed/charged to production during the period, and the extent of any under/over absorption. 2. Calculate profits for the period ended 31 August 2010 using absorption costing and variable costing respectively. (HINT: First calculate the variable cost per unit and the absorption cost per unit before trying to calculate the profits? (14) 3. Reconcile the profit figures which you calculated in (2) above and state the situation(s) in which the profit figures calculated would be the same. 4. Comment on Jacob Ntuli's statement regarding overtime and control accounts by stating, with reasons, whether you agree or disagree with him. (3) QUESTION 1 (25 MARKS) Greengage Limited produces and sells a revolutionary health product which promises to "make you look and feel 10 years younger". The newly appointed management accountant, Jacob Ntuli, feels rather overwhelmed in his new position, and has approached you for assistance. Amongst other things, he is not sure what costing system to use (variable or absorption). Jacob presented you with the following information for the period ended 30 June 2022 : - The overhead absorption rates are based upon normal activity of 720000 units per period. - During the period just ended 780000 units of the health product were produced, and 690000 units were sold at Rg per unit. - At the beginning of the period 120000 units were in stock which were valued at the budgeted costs shown above. - Actual costs incurred for the period were as per budget. After presenting you with the above information, Jacob mentioned the following to you: 'My new position requires me to work overtime in addition to my normal working hours - often I have to work with control accounts that are setup within the cost accounting system which I thirk are unnecessary and waste my time as they serve no purpose. No control accounts would equal no overtime at work and more family time at homel" Required: 1. Assuming Greengage Limited implemented an absorption costing system, calculate the fixed production overhead absorbed/charged to production during the period, and the extent of any under/over absorption. 2. Calculate profits for the period ended 31 August 2010 using absorption costing and variable costing respectively. (HINT: First calculate the variable cost per unit and the absorption cost per unit before trying to calculate the profits? (14) 3. Reconcile the profit figures which you calculated in (2) above and state the situation(s) in which the profit figures calculated would be the same. 4. Comment on Jacob Ntuli's statement regarding overtime and control accounts by stating, with reasons, whether you agree or disagree with him. (3)
