MAC3701 Assignment 2 (COMPLETE ANSWERS) Semester 2 2026 - DUE 15 September 2026

MAC3701 Assignment 2 (COMPLETE ANSWERS) Semester 2 2026 - DUE 15 September 2026; 100% TRUSTED Complete, trusted solutions and explanations. For assistance, Whats-App 0.8.1..2.7.8..3.3.7.2. Ensure your success with us .....QUESTION 1 (100 Marks; 180 Minutes) The Company information below applies to Parts A, B, C, D, and E of the assessment question paper. The additional information provided in each Part only applies to that part of the assessment question paper. 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 VoltAfrica Mobility (Pty) Ltd (VAM) is a South African manufacturer of electric motor vehicles with its main production facility located in Rosslyn, Pretoria. The company operates through two autonomous divisions that report directly to a central Head Office (HO). It supplies both local and international markets in the highly regulated automotive industry. VAM uses an absorption costing system, applies the first-in-first-out method to inventory and has a 31 December financial year-end. 1. ElectraDrive Vehicles Division (EVD) The ElectraDrive Vehicles Division (EVD) produces two vehicle models: Urban, a compact city vehicle, and Explorer, a larger electric sport utility vehicle (SUV). The manufacturing process involves installing lithium-ion battery packs, electronic control systems, and other direct materials (tyres, glass and seats) into locally manufactured vehicle bodies. Although other direct materials, such as tyres, glass, and seats, are purchased locally, battery cells and electronic components are imported and paid for in US dollars. 2. Precision Bodyworks Division (PBD) The Precision Bodyworks Division (PBD) specialises in manufacturing premium, custom-designed vehicle bodies for sedans and SUVs. The division supplies vehicle bodies to EVD through internal transfers and sells customised vehicle bodies to external customers, including specialist vehicle manufacturers and conversion companies. Components such as automotive-grade aluminium sheets, steel panels and carbon fibre composites are cut, shaped, welded, bonded and assembled into the custom vehicle body structure. Robotic equipment assists with precision welding, while skilled artisans complete custom modifications. The body undergoes sanding, corrosion treatment, priming and painting. Premium finishes may require multiple coats and specialised detailing. Downloaded by Edge Tutor () Scan to open on Studocu lOMoARcPSD| Page 3 of 8 MAC3701 Assessment 2_S2_2026 [TURN OVER] Media Allegations VAM is facing growing scrutiny after an explosive article by the Daily Herald reported potential graft in the EVD following the release of a favourable safety report for the company's electric cars: VAM has not yet issued a formal public statement on the allegations. Downloaded by Edge Tutor () Scan to open on Studocu lOMoARcPSD| Page 4 of 8 MAC3701 Assessment 2_S2_2026 [TURN OVER] PART A (30 Marks; 54 Minutes) As part of the budgeting process for the year ending 31 December 2027, EVD’s management is assessing the impact of increased competition from international electric vehicle manufacturers. Management would like to establish the extent to which market share for the Urban and Explorer models can decline before the company's budgeted financial objectives are adversely affected. The following budget information is available: Details per vehicle Urban Explorer Note Selling price R450 000 R700 000 1.2 Vehicle body 500 kilograms(kg) 750 kilograms(kg) 1.3 Lithium-ion battery pack 60 kWh 90 kWh 1.4 Electronic control systems R40 000 R50 000 Other direct materials 1 component set 1,5 component set 1.5 Direct labour clock minutes 2 400 clock minutes 3 600 clock minutes 1.6 Manufacturing overheads R35 000 R52 000 1.7 1.1 Budgeted production is 300 EVD Urban vehicles and 200 EVD Explorer vehicles. There is no budgeted opening or closing inventory of raw materials, work in progress or finished vehicles. 1.2 Budgeted sales volumes will equal budgeted production. Each EVD Urban will be sold for R450 000 and each EVD Explorer for R700 000. 1.3 Urban vehicle bodies are purchased at R250 000 per tonne(t). 1.4 Lithium-ion batteries are budgeted to cost R30 000 per battery pack. Each battery pack consists of four 5 kWh cells. 1.5 Other direct materials cost R20 000 per component set. 1.6 Direct labour is budgeted at R300 per clock hour. 1.7 Variable manufacturing overheads are budgeted at R20 000 per vehicle. Fixed manufacturing overheads are budgeted to be absorbed at R125 000 per vehicle. 1.8 Total selling and distribution costs amount to R28,11 million for the year. The variable selling and distribution costs are budgeted at 4% of sales. REQUIRED: PART A (A - a) Calculate the budgeted margin of safety per vehicle for the year-end ending 31 December 2027. (20) (A - b) From the media allegation information only, i. Identify and briefly discuss the ethical issue and any three business-related risks that VAM may be exposed to based on the media allegations. ii. Briefly identify and discuss any two-product quality KPI’s for EVDs in the context of the media allegations. (8) (2) Total Part A 30 Downloaded by Edge Tutor () Scan to open on Studocu lOMoARcPSD| Page 5 of 8 MAC3701 Assessment 2_S2_2026 [TURN OVER] PART B (14 Marks: 25 Minutes) During EVD’s planning session for August 2026, the management team presented the following: Details Urban R Explorer R Sales price 430 000 660 000 Total variable manufacturing cost 185 000 311 000 Fixed manufacturing overheads (FMO) 20 000 22 000 Variable selling and distribution costs 17 000 25 000 Additional information: • Based on dealership orders and expected customer demand, EVD expects to manufacture and sell a maximum of 25 Urban vehicles and 15 Explorer vehicles during August 2026 • EVD expects a total of 1 800 work hours and has made a 10% allowance for idle time. Each Urban model requires 2 100 clock minutes to manufacture, and each explorer model requires 3 500 clock minutes. • Shipping delays have limited the lithium-ion battery packs available for production in August; there is an 86% probability that only 3 000 kilowatt-hour (kWh) of battery packs will be available. The battery capacity required for each Urban vehicle is 60 kWh, while that for each Explorer Vehicle is 90 kWh. • There is no budgeted opening and closing of inventory of any type. REQUIRED: PART B (B - a) Calculate the budgeted optimum production mix in units to be manufactured for August 2026. (14) Total Part B 14 Downloaded by Edge Tutor () Scan to open on Studocu lOMoARcPSD| Page 6 of 8 MAC3701 Assessment 2_S2_2026 [TURN OVER] PART C (16 Marks: 29 Minutes) In October 2026, EVD had a standard costing system in place. There were no budgeted opening or closing inventories of any type. The following budgeted and actual information relates to October 2026. 1.1. Sales Actual sales quantities were 20% lower than actual production for both models. Management attributed the decrease to weaker consumer demand and delays in the approval of vehicle-finance applications. Budgeted sales were equal to budgeted production. 1.2. Human resources • EVD employs direct labourers who can work interchangeably on the Urban and Explorer assembly lines. The following information is available: Details Urban Explorer Standard labour clock minutes per unit 2 400 3 600 Actual labour clock minutes per unit 1 800 3 300 Actual labour work minutes per unit 1 584 2 904 • The standard idle time allowance for direct labour is 10%. The standard labour rate was R270 per clock hour, while the actual labour rate per the wage records is R280 per clock hour. 1.3. Standard material requirements for vehicle assembly • EVD maintains standards for all materials used in production. The following information relates only to the vehicle body and lithium-ion battery components used in vehicle assembly. Details Budgeted price Standard per unit Urban Explorer Vehicle body R275 000 per tonne 525 kg 775 kg Lithium-ion battery packs R 1 200 per kWh 75 kWh 105 kWh Actual purchases and issues for Explorer Vehicle body 14,75 tonnes for R4 130 000 Lithium-ion battery pack 1 950 kWh for R2 535 000 Details Urban Explorer Selling price per vehicle R430 000 R670 000 Standard gross profit per vehicle R180 000 R220 000 Standard contribution per unit R210 000 R250 000 Budgeted production 35 vehicles 15 vehicles Actual Production 30 vehicles 20 vehicles Downloaded by Edge Tutor () Scan to open on Studocu lOMoARcPSD| Page 7 of 8 MAC3701 Assessment 2_S2_2026 [TURN OVER] PART C (continued) 1.4. Fixed manufacturing overheads (FMO) EVD absorbs fixed manufacturing overheads using budgeted direct labour clock hours. The budgeted fixed manufacturing overhead absorption rate is R3 000 per direct labour clock hour. REQUIRED: PART C For answering Part C only, assume the following: • A standard costing system is in place. • The implications, if any, of opening and closing inventory should be ignored. (C - a) Calculate sales mix variance for October 2026 per product type. (4) (C - b) Calculate the labour idle time variance for October 2026 per product type. (5) (C - c) Calculate the Explorers direct material usage variance for October 2026 (per material type and in total). (4) (C - d) Calculate EVD’s total FMO volume efficiency variance for October 2026. (3) Total Part C 16 Downloaded by Edge Tutor () Scan to open on Studocu lOMoARcPSD| Page 8 of 8 MAC3701 Assessment 2_S2_2026 [TURN OVER] PART D (30 Marks: 54 Minutes) Frontier Vehicle Conversions (FVC) Ltd, a specialist vehicle-conversion company operating in Namibia, has approached PBD with a special order for 25 customised SUV bodies. The vehicle bodies must be modified for heavy-duty off-road applications, remote-area operations, and FVC’s branding. FVC has requested that the vehicles be delivered within a shorter period than PBD’s normal production lead time and has offered R575 000 per vehicle body compared to the normal selling price of R600 000. 1.1. PBD has limited production capacity. Accepting the order will result in the loss of 15 standard premium SUV bodies in sales, with each generating a contribution margin of R230 000. 1.2. The variable manufacturing cost of each customised SUV body will be R250 000. This excludes the cost of overtime, specialised reinforcement materials and branding. 1.3. Standard fixed manufacturing overheads are allocated at R22 000 per vehicle body. 1.4. Variable selling and distribution costs will be R12 000 per customised vehicle body. 1.5. PBD plans to replace an existing automated body-positioning transporter at a cost of R1,5 million. The transporter will be replaced regardless of whether the special order is accepted. 1.6. PBD must import a specialised composite-forming machine for $80 000 ($1:R16,50) for the special order. The machine can be sold for 50% of its cost after the order is completed. 1.7. PBD will depreciate the equipment on a straight-line basis over four years. 1.8. Employees will require training to operate the composite-forming machine. The training will cost R120 000. The equipment supplier has agreed to reimburse the full training cost. 1.9. To meet FVC's accelerated delivery deadline, PBD will be required to operate additional overtime shifts. Each customised SUV body will require 18 productive hours of overtime labour at an overtime premium rate of R270 per clock hour. PBD has a 10% idle time allowance. 1.10. Each customised SUV body requires additional structural reinforcement materials consisting of specialised aluminium, high-strength steel and carbon-fibre components costing R20 000 per tonne. Each SUV body requires 750 kg of structural reinforcement. 1.11. Specialist quality testing and certification of the reinforced structures will be conducted on every fifth customised vehicle body at a cost of R15 500 per test. 1.12. FVC’s branding, logo and vehicle wrapping will cost R8 000 per vehicle body. 1.13. PBD requires a minimum relevant profit equal to 20% of the total relevant costs of each special order. 1.14. FVC requires PBD to provide a five-year structural warranty on customised vehicle bodies. PBD normally provides a three-year warranty on its products. REQUIRED: PART D (D - a) From a quantitative perspective only, advise if PBD Should accept the special order. In your assessment, you must: • Indicate whether and provide a reason why you include/exclude each amount; • Focus on the application of the relevant costing principles (20) (D - b) Briefly discuss five qualitative factors PBD should consider before accepting the special order from FVC. (10) Total Part D 30 Downloaded by Edge Tutor () Scan to open on Studocu lOMoARcPSD| Page 9 of 8 MAC3701 Assessment 2_S2_2026 [TURN OVER] PART E (10 Marks: 18 Minutes) PBD is preparing production budgets for customised Sedan bodies for the 2027 financial year. The cost accountant has prepared the following production working paper: Production Budget for the year ending 31 December 2027 Details Units Forecast sales 1 200 Add: Desired closing inventory (10% × 1 200) 120 Add: Damage and handling losses (5% × 1 month's sales)* 5 Required production 1 325 * One month's sales = 1 200 ÷ 12 = 100 units Damage losses = 5% × 100 = 5 units Additional information 1.1. External demand is forecast at 1,200 customised Sedan bodies for the year, with sales expected to occur evenly throughout the year. 1.2. During production, an estimated 0.5% of units started will be lost due to manufacturing defects and cannot be reworked. 1.3. Management has decided to keep closing inventory at 10% of annual sales. 1.4. Damage and handling losses of finished goods are expected to amount to 2% of one month's sales during the year. 1.5. At the beginning of the year, PBD had 128 Sedan bodies in finished goods inventory. Required PART E (E - a) Draft a memorandum to management (2 format marks) in which you critically evaluate the cost accountant's production budget calculation for December 2027. In your critical evaluation, you must: • Review all the information/workings for errors and/ or omissions, and where applicable, provide correct workings.