QUESTION 1 You are the management accountant of Erika (Pty) Ltd. You are provided with the following data pertaining to the year ended October 2017 Original Budgeted Data for the year ended 31 October 2017: Forecast Data for the year ended 31 October 2017: Units Produced Budgeted Cost for each unit of product Direct Material: Actual Data for the year ended 31 October 2017: Units Produced: 9.500.00 Actual Costs Direct Material 9,000.00 Units Produced: 9,700.00 Direct Material: 15 kg at R 1.5 per kg 5.2 kg at R 15 per kg 4 kg at R 5.22 per kg XX YY ZZ 17 kg at R 1.65 per kg 6.2 kg at R 17 per kg 5 kg at R 5 per kg XX YY ZZ 96,500 kg at R 1.25 per kg 48,100 kg at R 11.50 per kg 14,100 kg at R 5.20 per kg 10 ZZ 12 Direct Wages Direct Wages Direct Wages-total 5 hours at R 3 per hour (per unit) 5 hours at R 3 per hour (per unit) 47,100 hours at R 3.18 per hour 14 15 16 17 18 Variable Production Overhead Variable Production Overhead R 4.5 per unit Variable Production Overhead - total R 4 per uni R 35,200 Administration & Marketing Expenses (total) Administration & Marketing Expenses (total) R 112,000 Administration & Marketing Expenses R 110,000 R 99,200 20 21 Actual Sales for the year ending 31 October 2017 came to 8,855 units at a price of R 151.5 per unit Fixed production overhead is absorbed at 200% of direct wages, and the actual fixed production overhead expenditure was R 295.500 for the year 25 26 27 28 a Using the data given, you are required to prepare the absorption income statement for the year ended 31 October 20 29 b What would the operating income be for Erika (Pty) Ltd using variable costing (shortcut formula) 30 C Based on the profit on the income statement the HR manager proposed a new incentive scheme for production staff. She is proposing a bonus based solely 31 32 Required on the nett profit of the organisation. You have a meeting with the Managing Director of Erika (Pty) Ltd. Explain the advantages & disadvantages of the HR Manager's proposal 34 a 35 OS Purchases CS USED MVOH MFOH ADMIN & MARKETING F G 28 a Using the data given, you are required to prepare the absorption income statement for the year ended 31 October 20 29 b What would the operating income be for Erika (Pty) Ltd using variable costing (shortcut formula) 30 Based on the profit on the income statement the HR manager proposed a new incentive scheme for production staff. She is proposing a bonus based solely on the nett profit of the organisation. You have a meeting with the Managing Director of Erika (Pty) Ltd. Explain the advantages & disadvantages of the HR Managers proposal 32 OS Purchases CS USED MVOH MFOHH ADMIN & MARKETING 34 a 35 36 37 INCOME STATEMENT WIP MATERIALS INPUT 38 39 REVENUE COS LABOUR OH OVERUNDER ADMINMARKETING MFOH TOTAL FG 45 47 51 ses CS USED 57 b 61 QUESTION 2 You are the owner of Boekenhout (BH), a business in Cape Town that produces clay fireplaces for the international market. During January BH produced 7,800 units, and the accounting records indicated the following Direct material purchased Direct labour Direct material used 25,000 kg 40,100 hours 23,100 kg R 5,20 per kg R 34 per hour 10 12 13 The fireplaces have the following standard prime costs Total R 5 per kg 15 16 17 18 19 20 Direct material Direct labour Total Required For the month of January calculate the following variances, indicating whether each is favourable or R15 R180 R195 5 hours R 36 per hour 24 25 26 unvafourable Direct Material Price Variance Direct Material Quantity Variance Direct Labour Rate Variance Direct Labour Efficiency Variance Discuss the materials and labour variances that you calculated by providing typical scenariOS 28 29 30 31 32 34 a 35
