MAC3701 Assignment 2 (COMPLETE ANSWERS) Semester 1 2025 - DUE 16 April 2025;100% CORRECT AND TRUSTED SOLUTIONS

MAC3701 Assignment 2 (COMPLETE ANSWERS) Semester 1 2025 - DUE 16 April 2025;100% CORRECT AND TRUSTED SOLUTIONS QUESTION 1 (100 Marks; 180 Minutes) The Company information below applies to Parts A, B, C, D, and E of assessment 02. The additional information provided in each Part only applies to that part of assessment 02. For each Part below, you must: • Clearly show all your calculations in detail (marks are awarded for calculations); • Where necessary, indicate irrelevant amounts/adjustments with an R0 (nil-value); • Round all your workings to two decimals, except where otherwise stated, and • Ignore the time value of money and all taxation implications. Company information Pedal Pump (Pty) Ltd (PP) is a South African company that manufactures and sells both Standard (SPump) and Booster (BPump) bike floor pumps. The company prides itself on producing high-quality, durable products catering to urban and professional cyclists. The company's manufacturing plant is based in Benoni; they sell locally and export their products to various African and European markets. The BPump has an added high-pressure aluminium air chamber that quickly releases air to seat tubeless tyres on the tyre rim. The manufacturing process primarily involves the melting and extrusion of aluminium into the pump body and valve head tubing, while reinforced rubber and rubberised composite are heated and injected into moulds to create durable handles, hoses, and base plates. PP purchases other minor components separately and adds them to the manufacturing process. The company relies on dollar-denominated imports of high-quality aluminium and rubber, which also have a high carbon footprint. The industry has low barriers to entry, with stiff competition putting pressure on profit margins. New South African manufacturing regulations require stricter quality control and product safety testing, likely increasing operational costs. PP’s management is considering using cheaper materials to reduce costs and dependence on imported materials. After paying a generous facilitation fee, the company obtained a "compliant" compliance rating for a recent compliance inspection. The company uses an absorption costing system, values all its inventory items using the first-in-first-out (FIFO) method and has a 31 December financial year-end. Page 3 of 8 MAC3701 Assessment 02/S/2025 [TURN OVER] PART A (20 Marks; 36 Minutes) PP is finalising budgets for the 2025 financial year and budgeted to achieve a profit of R28,5 million for the 2025 financial year. The cost accountant presented the following calculation for the budgeted amount of units to achieve the target profit for the 2025 financial year: Details per unit SPUMP R BPUMP R Note Selling price 2 500 4 500 1.2 Less: Total Prime costs 1 500 2 700 1.3 Less: Manufacturing overheads 230 230 1.4 Less: Selling and distribution costs 35 35 1.5 Contribution per unit R735 R1 535 1.1 The budgeted production was 60 000 units of SPump and 40 000 units of BPump. There is no budgeted opening and closing inventory of any type. 1.2 Budgeted sales volumes will equal the budgeted production, for SPump and BPump. Each product will be sold for R 2 500 for SPump and R 4 500 for BPump. 1.3 Prime costs consist of direct labour and materials and are budgeted at 70% of the sale price. 1.4 For both products, manufacturing overheads consist of fixed and variable manufacturing overheads absorbed at R150 and R80 per unit, respectively. 1.5 Selling and distribution costs are budgeted at a total of R10 million for the financial year, with variable selling and distribution costs of R35 per unit. 1.6 Budgeted fixed administrative costs were R12,5 million for the financial year. REQUIRED: PART A (A - a) Critically evaluate the cost accountant’s calculation of units required to achieve the target profit for the year-end ended 31 December 2025. In your critical evaluation, you must: • Indicate whether and provide a reason why you agree/disagree with each amount; • Review all the information/workings for errors and/ or omissions, and where applicable, provide correct workings; (20) Total Part A 20 Details – units Workings Target profit in units = R + R (R735 + R1 535) Target profit units = 9 911, 89 ≈ 9 911 Target profit point units (SPump) = 9 911 x 64% = 6 343 units Target profit point units (BPump) = 9 911 x 36% = 3 568 units