QUESTION 5 (20 MARKS)

CleanScene Shampoo Manufacturer is in the business of producing shampoo for colour treated hair. Shampoo is manufactured and packaged in 500ml bottles. You received a phone call from their financial manager, Mr. Clear Head, earlier this morning. He informed you that their cost accountant, Ms OeLaLa, eloped with her boyfriend to the Caribbean Islands the previous night. Upon her departure, she failed to complete a performance report. Mr. Clear Head is not impressed by her impulsive actions, as this leaves him with more work than he can possibly handle. He asked if you would be willing to set a performance report for CleanScene Shampoo Manufacturer. He provided the following information, relating to the budget for the year ended 29 February 2020:

Description Budget 25 000 bottles Budget 40 000 bottles Direct material R250 000 R400 000 Direct labour R625 000 R1000 000 Maintenance R187 500 R300 000 Electricity cost R370 000 R520 000 Indirect materials R150 000 R180 000 Rental costs R1000 000 R1000 000 Indirect labour wages R600 000 R600 000

Actual results for the year ended 29 February 2020 were as follows: Description Actual 35 000 bottles Direct material R315 000 Direct labour R890 000 Maintenance R245 000 Electricity cost R480 000 Indirect materials R165 000 Rental costs R1100 000 Indirect labour wages R545 000

Required: 5.1 Prepare a performance report for CleanScene Shampoo Manufacturer for the year ended 28 February 2020. (16 marks)

5.2 Capital budgeting is the analysis and evaluation of investment projects that normally produce benefits over a period of years. Discuss the classification of projects in respect of the following: a) Replacement versus expansion (2 marks) b) Independent and mutually exclusive