BACC 232 - 309-234 Assignment 1 (May-June 2024)

FACULTY OF COMMERCE
DEPARTMENT OF ACCOUNTING & AUDITING

BACC 232/234/309: MANAGEMENT AND COSTING ACCOUNTING/COSTING
ACCOUNTING
ASSIGNMENT I
Jan-June 2024 SEMESTER
Instructions
1. All assignments must be typed using New Times Roman font size 12, 1.5 line spaced,
referenced using 6th Edition APA Guidelines, justified both sides, include a standardized
cover page and uploaded as a SINGLE PDF file.
2. It is the responsibility of the student to upload their assignments in time to avoid
inconveniences due to internet failure, system failure, power outages or any other unforeseen
circumstances. NO submission extensions will be granted by the Department after the
deadline.
3. All queries for this assignment must be directed to the Course Leader whose contact details
are on the List of Course Leaders available on MyVista.
4. Plagiarism is a serious academic offence. Credit will be given for well written and referenced
assignments. Please refer to the Tutorial Letter and other resources for more information on
academic writing.
Question 1
Martinelli Limited is a small manufacturing company producing a variety of pumps for the oil industry.
It operates from one factory that is geographically separated from its head office. The components for
the pumps are assembled in the assembling department; they are then passed to the finishing
department, where they are painted and packed. There are three service cost centres: administration,
stores and work study.
The following costs were collected for the year to 30 June 2023
Allocated cost-centre overhead $000

costs:
Administration 70
Assembling 25
Finishing 9
Stores 8
Work study 18
Additional information:
1 The allocated cost-centre overhead costs are all considered to be indirect costs as far as
specific units are concerned.
2 During the year to 30 June 2023, 35 000 machine hours were worked in the assembling
department, and 60 000 direct labour hours in the finishing department.
3 The average number of employees working in each department during the year to 30
June 2023 was as follows:
Administration 15
Assembling 25
Finishing 40
Stores 2
Work study 3
–––
85
–––
1 During the year to 30 June 2023, the stores received 15 000 requisitions from the
assembling department, and 10 000 requisitions from the finishing department. The stores
department did not provide a service for any other department.
2 The work study department carried out 2000 chargeable hours for the assembling
department, and 1000 chargeable hours for the finishing department.
3 One special pump (code named MEA 6) was produced during the year to 30 June 2023. It
took 10 machine hours of assembling time, and 15
direct labour hours were worked on it in the finishing department. Its total direct costs
(materials and labour) amounted to $100.
Required:
(a) Calculate an appropriate absorption rate and comment on the:
(i) the assembling department; and
(ii) the finishing department. (20 marks)
(b) Calculate the total factory cost of the special MEA 6 pump (5 marks)
Question 2
Amiron Limited manufactures one product known as EC2. The following information relates
to the preparation of the budget for the year to 31 March 2005:
1 Sales budget details for product EC2: Expected

selling price per unit: $100. Expected sales in
units: 10 000.
All sales are on credit terms.
2 EC2 requires 5 units of raw material E and 10 units of raw material C. E is expected to cost
$3 per unit, and C $4 per unit. All goods are purchased on credit terms.
3 Two departments are involved in producing EC2: machining and assembly. The
following information is relevant:
Direct labour Direct labour

per rate per hour
unit of product $
(hours)
Machining 1.00 6
Assemblin 0.50 8
g
4 The finished production overhead costs are expected to amount to $100 000.
5 At 1 April 2004, 800 units of EC2 are expected to be in stock at a value of $52 000, 4500
units of raw material E at a value of $13 500, and 12 000 units of raw materials at a value
of $48 000. Stocks of both finished goods and raw materials are planned to be 10 per cent
above the expected opening stock levels as at 1 April 2004.
6 Administration, selling and distribution overhead is expected to amount to $150 000.
7 Other relevant information:
(a) Opening trade debtors are expected to be $80 000. Closing trade debtors are expected
to amount to 15 per cent of the total sales for the year.
(b) Opening trade creditors are expected to be $28 000. Closing trade creditors are
expected to amount to 10 per cent of the purchases for the year.
(c) All other expenses will be paid in cash during the year.
(d) Other balances at 1 April 2004 are expected to be as follows:
£ £
(i) Share capital: ordinary shares 225 000
(ii) Retained profits 17 500
(iii) Proposed dividend 75 000
(iv) Fixed assets at cost 250 000
Less: Accumulated depreciation 100 000
150 000
(v) Cash at bank and in hand 2 000
––––––––
8 Capital expenditure will amount to $50 000, payable in cash on 1 April 2004.
9 Fixed assets are depreciated on a straight-line basis at a rate of 20 per cent per annum
on cost.
Required:
As far as the information permits, prepare all the relevant budgets for Amiron Limited for the
year to 31 March 2005. (25 marks)
Question 3
Looking ahead to the financial year ending 31 March 2005, the directors of
Majata Limited are faced with a budgeted loss of $10 000. This is based on the
following data:
Budgeted number of units: 10 000
$000
Sales revenue 100
Less: Variable costs 80
––––
Contribution 20
Less: Fixed costs 30
––––
Budgeted loss (10)
––––
The directors would like to aim for a profit of $20 000 for the year to 31
March 2005. Various proposals have been put forward, none of which
require a change in the budgeted level of fixed costs. These proposals are
as follows:
1 Reduce the selling price of each unit by 10 per cent.
2 Increase the selling price of each unit by 10 per cent.
3 Stimulate sales by improving the quality of the product, which would
increase the variable cost of the unit by $1.50 per unit.
Required:
(a) For each proposal calculate:
(i) the break-even position in units in value terms; (10 marks)
(ii) the number of units required to be sold in order to meet the profit target.
(5 marks)
(b) State which proposal you think should be adopted. (10marks)
Answer to Example 19.9 continued
others. Some extra stimulus would be needed, however, to lift sales to this level over such a relatively short period
of time. It is not clear, why an increase in price would increase sales, unless the product is one that only sells at a
comparatively high price, such as cosmetics and patent medicines. It must also be questioned whether the cost
relationships will remain as indicated in the exhibit over such a large increase in activity. In particular, it is unlikely
that the fixed costs will remain entirely fixed if there were to be a 66.7% increase in sales.

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FACULTY OF COMMERCE

DEPARTMENT OF ACCOUNTING & AUDITING

Allocated cost-centre overhead $000

1 Sales budget details for product EC2: Expected

Direct labour Direct labour

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