QUESTION 1

A company is producing a product with the following information: Cost (Rands) Sale Price 50 Variable cost 30 Fixed cost 50 000 Budgeted Production 6 500 Calculate the following using ratios (Round all answers to the nearest 10): 1.1 Contribution to sales ratio (2) 1.2 Breakeven point in units (2) 1.3 Breakeven point in revenue (2) 1.4 How many units need to be sold to achieve a profit of R50 000 (2) 1.5 How much revenue is required to achieve a profit of R50 000 (2) 1.6 The margin of safety (2) [12] INC2601/101/03/2021 Page 15 of 18 QUESTION 2 An Non-Profit Organisation (NPO) took the initiative to offer soup to the destitute due to the resurgence of the Covid 19 pandemic. This NPO makes the soup using two raw materials, leeks and potatoes. In December 4000 litres of soup were made using 8900 leeks and 29 100 potatoes. The standard materials usage and cost of one litre of soup is: Item Item cost Total Cost (R) Leeks 5 @ R0.29 per Leek 1.45 Potatoes 8 @ R0.15 per potato 1.20 Total 2.65 Calculate the following: 2.1 The total raw material used (2) 2.2 Standard mix for 1 unit (2) 2.3 Compare standard mix to actual mix (5) 2.4 Mix Variance (3) 2.5 Test your understanding of the variance concepts by answering the following questions: 2.5.1 What does the Sales Price Variance tell us? (2) 2.5.2 What does the Sales Volume Variance tell us? (2) 2.5.3 What does the Materials Price Variance tell us? (2) 2.5.4 What does the Materials Usage Variance tell us? (2) 2.5.5 What does the Labour Rate Variance tell us? (2) 2.5.6 What does the Labour Efficiency Variance tell us? (2) 2.5.7 What does the idle time Variance tell us? (2) 2.5.8 What does the Variable Overhead Rate Variance tell us? (2) 2.5.9 What does the Variable Overhead Efficiency Variance tell us? (2) 2.5.10 What does the Fixed Overhead Expenditure Variance tell us? (2) INC2601/101/03/2021 Page 16 of 18 2.5.11 What does the Fixed Overhead Volume Variance tell us? (2) [34] QUESTION 3 A product has a four-year life-cycle. The costs in each year are shown below: Year 1 2 3 4 R&D 300 Design 200 Product Cost 75 90 90 Marketing Cost 70 50 30 Distribution Cost 20 27 24 Customer Service Cost 15 23 30 3.1 Calculate the total life-cycle cost and categorise them into each type of cost and categorise them into each type of cost. (Show all calculations) (6) 3.2 Discuss the 5 phases of a product life cycle? (5) 3.3 During what phase can most of the cost be incurred? (2) 3.4 Why might a product cost go into decline? (2) [15] QUESTION 4 The following information was obtained from the books of a company, regarding material ABC for the year ended 30 September 2020: Average inventory 60 units Orders per year 40 orders Average daily demand 16 units Re-order point 80 units Annual carrying costs R2 400 The above quantities and costs are optimal according to the Economic Order Quantity formula approach. Calculate the following: INC2601/101/03/2021 Page 17 of 18 4.1 Economic order quantity (3) 4.2 Annual demand (3) 4.3 Working days per year (3) 4.4 Lead time in days (3) 4.5 Annual ordering costs (3) 4.6 Cost of placing one order (3) 4.7 Annual unit carrying cost (3) [21] Choose between Question 5 and 6 QUESTION 5 A manufacturing company manufactures two components A & B. The Company plans to manufacture 5500 of each component in the coming year. The following information is available for each component A & B. A total of 50000 machine hours are available. A subcontractor is willing to supply ABC with component A & B for R37 and R48 respectively. Component Machine Hrs Variable Cost (R) A 5 35 B 8 44 5.1Advise the manufacturing company on what to do, manufacture or both? (20) Note: Marks will be allocated according to hours it will take to manufacture both products and the cost of manufacturing both products as well as the advice [20] OR QUESTION 6 The following data given to produce a product: Total Overheads 230 000 Costs relating to set ups 60% Costs relating to inspections 40% INC2601/101/03/2021 Page 18 of 18 Number of Set ups 120 Number of Inspections 40 6.1 Calculate the Cost per Driver for the product (10) 6.2 Using the cost per driver in the previous question, what are the total overheads applicable to product A, given: (10) Number of Set ups 25 Number of Inspections 7 [20]