QUESTION 1 [30 MARKS] Minks Pty Ltd manufactures household goods that uses Teflon which is used in many products due to its waterproofing qualities and non-stick surfaces it can create. Since the pandemic lockdowns, the entity has been financially struggling but there are signs of economic improvements. Minks Pty Ltd had not received any sales orders for the past three months but last week, the company received an order from one of its regular customers. Minks Pty Ltd produced the following budgeted figure for the month ahead ending 31 October 2021.

The companys finance policy stipulates that it uses: Absorption costing; Variable costs are assumed to be linked to direct labour hours; Fixed costs are a percentage of total variable costs; and Profits are a percentage of total costs. Regarding the order from Most Buys Pty, a regular customer, your management accounting department was asked to prepare a quotation based on an order that requires 1,000 kgs of Teflon and 2,400 man-hours of labour.

i. For materials: price per kg. (2) ii. For labour: labour hourly rate. (2) iii. Variable overhead rate. (2) iv. Total variable costs. (2) v. Percentage of fixed costs to be applied to the quote. (2) vi. Total costs. (2) vii. Budgeted profit rate. (2) viii. Quotation price. (13) ix. Explain the reason why the hourly labour rate calculated in (ii) is different from the one calculated in (iii).

Detail R R R 9,396,000 Sales Teflon (75,000 kgs) Direct labour (30,000 hours) Variable overheads Total variable costs Fixed costs Total costs 3,000,000 600,000 1,800,000 5,400,000 2,430,000 7,830,000 Budgeted profit 1,566,000