QUESTION 1
Namib Grapes CC is registered is a company that buys Grapes from Aussinkher farm, this farm is situated in the south of Namibia. Namib Grapes and Aussinkher Farm agreed on a normal delivery time of two weeks and in difficult circumstances a maximum delivery time of four weeks is allowed. This agreement was reached after taking into account that Grapes can only be transported across by a mini truck that does not exceed the speed of 60 km per hour. After careful analysis of the operations of Namib Grapes, the following information became available:
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Normal usage
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5000 units per week
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Purchase price per unit
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$20,00
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Average storage cost per unit per annum
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$ 3,50
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|
Cost of placing an order
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$75,00
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|
Prime interest rate
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10%
|
|
Production weeks per annum
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48
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The purchase of grapes is financed using an overdraft facility.
REQUIRED
1. Calculate the re-order level.
2. Calculate the safety stock.
3. Calculate the economic order quantity.
4. Calculate the average stock level.
5. Calculate the numbers of orders per year
6. Calculate the ordering cost per year
QUESTION 2
Kavango Investment CC provided you with the following information for the week ending 31 January 2016:
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Name
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Position
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Normal Rate Per Hour
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Hours Worked During the Week
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|
|
|
|
|
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Muremi A.
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Receptionist
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N$ 72.50
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59
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Ruben N.
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Quantity Surveyor
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N$ 95.00
|
57.5
|
|
Tabby T.
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Engineer
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N$ 115.00
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50.5
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Important Information;
• The Normal working hours are 45 hours per week.
• Overtime is remunerated at time and a half of normal rate.
• Employees get birthday bonuses on their month of birth. The bonus is 35% of the basic wage.
• The following deductions must be considered:
o Income Tax (PAYE) is 15%
o Social Security Contribution is 2% of the basic wage.
o Pension fund 5% employee; 8,70% employer, all based on basic salary
o Medical Aid N$35 per person; 2% of the basic pay by employer
• The company only has one Quantity Surveyor who was born on the 27th January 1984.
REQUIRED
1. Prepare a Payroll with all the detailed information for the week ending 31 January 2016.
2. Compile the Journal Entries of the payroll accounts for the week ending 31 January 2016.
QUESTION 3
NSP Limited produces tents for entertainment and for the outdoors. Production takes place in three departments, namely Cutting, Sewing and Finishing. Shown below is an extract from the budget for the manufacture of 8 800 tents for the year ended 31 May 2016:
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Manufacturing cost centre
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Service cost centre
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|
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Cutting
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Sewing
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Finishing
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Personnel
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Inspection
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Budgeted overheads
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N$411 525
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N$72 850
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N$82 900
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N$118 500
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N$92 200
|
|
Allocations of overheads
|
|
|
|
|
|
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- Personnel
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18%
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38%
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29%
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-
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15%
|
|
- Inspection
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45%
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13%
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32%
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10%
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-
|
Required:
1 Calculate the allocation of overheads to the production cost centres using the repeated distribution method. (Start with the Personnel cost centre).
2 Confirm your answer in 4.1 by using the method of simultaneous equations.
QUESTION 4
Mr. James Chapman has recently qualified as an auditor, he and his class mate are thinking of opening up a small firm in their home town of Rehoboth. After a review of active firms in other small towns and interviews on how jobs use those firm's resources, they felt they had enough information to go ahead with the start-up. Chapman & Associates would operate using two direct cost categories (partner labour and audit manager labour) there would also be two indirect cost categories, namely clerical labour and general administration support. These would yield more accurate job costs. Budgeted information for operations in 2016 is as follows:
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Partner labour
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Audit Manager labour
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Number of employees
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2
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10
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Hours of billable time per employee
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600
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600
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Total compensation (per employee) (N$)
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84 000
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30 000
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Budgeted information for the two indirect cost categories is as follows:
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Clerical labour
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General admin support
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|
Total costs (N$)
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810 000
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180 000
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Cost allocation base
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Partner labour
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Audit Manager labour
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Required:
Compute the 2016 budgeted rates for
(a) Partners
(b) Audit Managers
Compute the 2016 budgeted indirect cost rates for
(a) clerical hours
(b) general admin support
Calculate the budgeted costs for Chapman & Associates given the following:
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|
Purco Ltd
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Max Ltd
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Partners
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24
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16
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Audit Manager
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36
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64
|
Required:
Calculate the cost of the two jobs for
(a) Purco Ltd
(b) Max Ltd
ASSIGNMENT 2
QUESTION 1
Define or briefly explain the following terms used in Management Accounting:
1.1.1 Flexible budget
1.1.2 Wastage
1.1.3 Machine hour rate
1.1.4 Marginal cost
1.1.5 Activity based costing
What would be the effect of using last in first out (LIFO) method of valuation stock rather than first in first out (FIFO) method in a period of rising prices?
Minox uses the economic order quantity formula (EOQ) to establish its optimal reorder quantity for its single raw material. The following data relates to the stock costs:
Purchase price: N$15 per item
Ordering costs: N$55 per order
Storage costs: 10% of purchase price plus N$0.20 per unit per annum
Annual demand: 4 000 units
What is the EOQ?
A Domestic appliance retailer with multiple outlets stocks a popular toaster known as the Autocrisp 2000, for which the following information is available:
Average sales 75 per day
Maximum sales 95 per day
Minimum sales 50 per day
Lead time 12 - 18 days
Re-order quantity 1 750
Based on the data above, answer the following questions:
At what level of stock would a replenishment order (Max usage x Max lead time) be issued?
What is the maximum level (Re-order level + Re-order qty - Min usage during Min lead time) of stock possible?
The following cost and inventory data are taken from the accounting records of Home Doctor CC for the year ended 28 February 2007:
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N$
|
|
Costs incurred:
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|
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Advertising
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100,000
|
|
Direct labour costs
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90,000
|
|
Purchases of raw materials
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132,000
|
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Rent - Factory building
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80,000
|
|
Indirect labour
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56,300
|
|
Sales commissions
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35,000
|
|
Utilities - factory
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9,000
|
|
Maintenance - factory equipment
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24,000
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|
Supplies - factory
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700
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Depreciation - office equipment
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8,000
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| Depreciation - factory equipment |
40,000 |
Required:
Prepare a schedule of cost of goods manufactured.
QUESTION 2
There are two production cost centres (P1 and P2) and two service cost centres (Materials Store and Canteen) in a factory. Estimated overhead costs for the factory for a period, requiring apportionment to cost centres, are:
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N$
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Buildings depreciation and insurance
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42 000
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|
Management salaries
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27 000
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|
Electricity to operate machinery
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12 600
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Other utilities
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9 400
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In addition, the following overheads have been allocated to cost centres:
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Cost Centres
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P1
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P2
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Materials Store
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Canteen
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N$107 000
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N$89 000
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N$68 000
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N$84 000
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Further information:
|
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Cost Centres
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Total
|
|
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P1
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P2
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Material store
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Canteen
|
|
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Floor Area (m²)
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4 560
|
5 640
|
720
|
1 080
|
12 000
|
|
No of employees
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18
|
24
|
6
|
6
|
54
|
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% other utilities
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35%
|
45%
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10%
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10%
|
100%
|
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Machine hours
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6 200
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5 800
|
|
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12 000
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Share of Materials Store
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40%
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60%
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|
|
100%
|
Required:
Prepare a schedule showing the primary allocation based on the above information.
Show also the secondary allocation
QUESTION 3
Colours Limited, a commercial painting contractor, uses a normal costing system to cost each job. Its job costing system has two direct categories (direct material and direct labour) and one indirect cost pool called overhead costs. To each job, Colours Limited allocats overhead at a budgeted rate of 80% of direct labour costs. Colours Limited provides the following additional information for February 2007:
a) As of 1 February 2007, Job A21 was the only job in process, having incurred direct material costs of N$30 000 and direct labour costs of N$50 000.
b) Jobs A 22, A 23, A 24 were started during February.
c) Direct materials used during February were N$150 000.
d) Direct labour costs for February were N$120 000.
e) Actual overhead costs for February were N$102 000.
f) On 28 February 2007, only Job A24 was still in process, having incurred direct material costs of N$20 000 and direct labour costs of N$40 000.
Colours Limited maintains a Jobs-in-Process control account in its general ledger. As each job is completed, its cost is transferred to the Cost of Jobs Billed account. Each month, Colours closes any under- or over- allocated overhead to Cost of Jobs Billed.
Required:
Give two examples of a direct cost and one example of an overhead cost for a job undertaken by Colours Limited.
Calculate the overhead allocated to Job A21 as of 1 February 2007.
Calculate the overhead allocated to Job A24 as of 28 February 2007.
Calculate the under- or over-allocated overhead for February 2007.
Calculate the Cost of Jobs Billed for February 2007.
Muronga Ltd supplied the following details regarding a contract that was still in progress at the end of the accounting period ended 29 February 2008:
Contract price R100 000
Cost to date R 60 000
Estimated costs to completion R 12 000
Sales value of work certified R 75 000
Cost of certified work R 50 000
Retention amount R 7 500
Calculate the amount of profit on this contract that may be transferred to the profit and loss account for the past accounting period, using each of the following methods:
The work certified method
The percentage of completion method
QUESTION 4
Katu Ltd manufactures a single product in one process and uses a process costing system. The following information is available for May 2007:
|
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N$
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Units
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|
Work in process - 1 May 2007
|
-
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-
|
|
Units placed into process during May
|
|
47 500
|
|
Units completed
|
|
35 000
|
|
Costs for the month: Material
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356 250
|
|
|
: Conversion costs
|
276 000
|
|
|
Work in process - 31 May 2007
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|
2 500
|
|
Percentage complete:
|
|
|
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Material - 100%
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|
|
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Conversion costs - 40%
|
|
|
Additional information:
a). Raw material is added at the beginning of the process. Conversion costs are incurred evenly throughout the process.
b). Normal wastage is estimated at 10% of input that reach the point of wastage. c). Losses occur at the end of the process.
d). Inventory is valued according to the weighted average method.
Required:
Prepare the following statements for May 2007:
Production statement
Production cost statement
QUESTION 5
Ramatex Manufacturers produces three similar products using the same machines and production processes. For the year ended 30 June 2007, production volumes are estimated as follows:
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Annual production volumes (units)
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Product name
|
|
80 000
|
Postikel (P)
|
|
25 000
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Rostikel (R)
|
|
32 000
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Costikel (C)
|
Total annual fixed production overheads are projected at N$3 475 000. For the purposes of performing and overhead allocation using activity-based costing principles, the following cost pools together with percentages, are presented to you:
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Overhead activity (cost pool)
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Allocated overheads (of the total)
|
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General manufacturing
|
20%
|
|
Quality control
|
30%
|
|
Material handling
|
15%
|
|
Stores
|
35%
|
Pertinent cost driver and cost driver usage figures are tabled below:
|
|
|
Cost driver usage
|
|
Cost Driver
|
Overhead facility
|
P
|
R
|
C
|
|
Direct labour hours
|
General manufacturing
|
20 000
|
20 000
|
10 000
|
|
Number of quality inspections
|
Quality control
|
180
|
220
|
100
|
|
Number of movements
|
Material Handling
|
226
|
310
|
214
|
|
Number of stores requisitions
|
Stores
|
1 920
|
1 865
|
1 215
|
Required:
Calculate the overhead absorption rate for each product based on:
traditional costing methods (labour hour basis)
activity-based costing principles