QUESTION 4 - 20 Marks (24 Minutes) THIS QUESTION CONSISTS OF TWO (2) INDEPENDENT PARTS. PART A - 10 Marks (12 Minutes) Khathaza (Pty) Ltd has tendered for a once-off contract to repair a portion of the railway line between Johannesburg and Soweto. The following cost estimates were used for the purpose of arriving at the tender price: R Direct materials - steel 700 000 Direct materials - wiring and ancillaries 300 000 Direct labour-engineering (3 000 hours @ R150 per hour) 450 000 Direct labour - unskilled (10 000 hours @ R50 per hour) 500 000 Variable overheads 200 000 Absorbed fixed overheads 200 000 Total estimated cost R2 350 000 Khathaza (Pty) Ltd tendered price at R2 820 000 by adding a mark-up of 20% on the above total estimated costs. The company has been informed that their tender for the railway project was unsuccessful You have recently been appointed as a Management Accountant of the company. The Managing Director has asked for your opinion as to whether the cost estimates on which the tender price was based were correct. You have reviewed the working files and have determined that: PART B - 10 Marks (12 Minutes) 260 Piccadilly is a small business that manufactures and sells three items of design clothing namely, Tweeto, Sweeto and Beeto, using the same resources but in different quantities. The company has branches in Johannesburg and Pretoria. The fashion industry is fast moving and consumer demand can change quickly due to the emergence of new trends. The budgeted selling prices per unit and resource requirements per unit are as follows: Details Tweeto Sweeto Beeto R R R Selling price 80 110 Direct materials (R20 per m) 120 40 Direct labour (R12 per hour) 72 27 Variable overheads (R3 per hour) 18 9 Fixed manufacturing overheads absorbed 10 10 Included in the original budget at the beginning of year was the sales demand for the month of September as shown below: Tweeto Sweeto Beeto Demand in September (units) 2 000 6 000 4 000 20 24 6 10 The items of clothing Tweeto, Sweeto and Beeto were featured in a fashion magazine. As a result of this, a new customer ordered 1 000 items of each of Tweeto, Sweeto and Beeto for delivery in September. The budgeted demand shown above does not include this order from the new customer It is estimated that there will be limited resources available in September. Resources will be limited to: Direct materials 20 000 m Direct labour 50 000 hours There will be no opening inventory of direct materials, work-in-progress and finished goods. Marks REQUIRED (a) Calculate the optimum production plan that will maximise the budgeted profit for September 2020. Assume that the new customer's order must be supplied in full during September 2020. TOTAL PART B (10) 10