MAC3701 ASSIGNMENT 2 SEMESTER 2 OF 2022

MAC3701 ASSIGNMENT 2 – SEMESTER 2 OF
2022
(a) Calculation of Production Units

Multi = [(120 000 * 10) + (120 000 * 1.15 * 2)] = 1 476 000
Ultra = [(51 000 * 10) + (51 000 * 1.15 * 2)] = 627 300

Production batch set – up costs

Number of set ups

Set ups
1 476 000
Multi ( 2 000 ) 738
627 300
Ultra ( ) 492
1 275
1 230


Production batch set – up costs OAR = 𝑇𝑜𝑡𝑎𝑙 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑𝑠
𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠𝑒𝑡 𝑢𝑝𝑠

7 990 080
=
1 230

= 𝑅6 496 𝑝𝑒𝑟 𝑠𝑒𝑡 𝑢𝑝

Rental of factory space

Machine hours

Set ups
Multi (738 * 1.5) 1 107
Ultra (492 * 1.7) 836.4
1 943.4


Rental of factory space costs OAR = 𝑇𝑜𝑡𝑎𝑙 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑𝑠
𝑇𝑜𝑡𝑎𝑙 𝑀𝑎𝑐ℎi𝑛𝑒 𝐻𝑜𝑢𝑟𝑠

23 758 065
=
1 943.4

= 𝑅12 225 𝑝𝑒𝑟 𝑚𝑎𝑐ℎi𝑛𝑒 ℎ𝑜𝑢𝑟




FOR ACCADEMIC NEEDS CONTACT /0651609781

, Permanent manufacturing staff salaries

Direct labour hours

Hours
5.40
Multi (1 476 000 * ) 132 840
60
10.80
Ultra (627 300 * ) 112 914
60
245 754


Rental of factory space costs OAR = 𝑇𝑜𝑡𝑎𝑙 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑𝑠
𝑇𝑜𝑡𝑎𝑙 𝑀𝑎𝑐ℎi𝑛𝑒 𝐻𝑜𝑢𝑟𝑠

8 797 990
=
245 754

= 𝑅35. 80 𝑝𝑒𝑟 𝑚𝑑i𝑟𝑒𝑐𝑡 𝑙𝑎𝑏𝑜𝑢𝑟 ℎ𝑜𝑢𝑟

Allocation of Fixed Manufacturing overheads

Multi Ulta
R R
Production line batch set up cost [(6 496 * 738); (6 496 * 492) 4 794 048 3 196 032
Rental of storage warehouse [(13 200 000 * 60%); (13 200 000 * 40%)] 7 920 000 5 280 000
Rental of factory [(1 107 * 12 225); (836.4 * 12 225)] 13 533 075 10 224 990
Permanent manufacturing staff salaries [(132 840 * 35.80); (112 914 * 35.80)] 4 755 672 4 042 321
31 002 795 22 743 343


(b) Support

As it uses a single cost driver to allocate overheads it is less expensive to implement
andoperate compared to ABC and it is easier to understand and apply.

Opposition

Allocation is based on a volume measure which does not necessarily represent
cause – and – effect relationships between costs and allocation leading to less
accuracy especially where multiple products are produced and production processes
are complex




FOR ACCADEMIC NEEDS CONTACT /0651609781