Mac3701 Assignment 1 Semester 2 Of 2023

MAC3702 ASSIGNMENT 1 0F SEMESTER 2 OF
2023
QUESTION 1
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two
types of solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar
geysers. Letsatsi makes use of an absorption costing system and all types of
inventory are valued using the first-in-first-out method (FIFO). The following
information is available for the financial year ended 30 June 2023:




1. There was no actual and budgeted opening inventory of any type for the 2023 financial
year.
2. No actual or budgeted normal material losses occurred in the production process.
3. Letsatsi’s fixed manufacturing overheads (FMO) are allocated based on the budgeted
direct labour clock hours. The total budgeted FMO was R655 000 per month and the total
actual FMO for the year was R9 200 000.
4. The budgeted other fixed administrative costs for the division were R2 358 000 per
annum and the actual other fixed administrative costs were R2 400 000.

The budgeted fixed manufacturing overheads allocation rate per direct labour clock hour for the 2023
financial year is:

Solution

Calculation of Total direct labour clock hours

Hours
120
LowP (28 000 * ) 56 000
60
150
HighP (30 000 * ) 75 000
60
131 000


ACCADEMIC NEEDS CONTACT /0651609781

,Fixed manufacturing overheads allocation rate per direct labour clock hour
𝑇𝑜𝑡𝑎𝑙 𝑏𝑢𝑑g𝑒𝑡𝑒𝑑 fi𝑥𝑒𝑑 𝑚𝑎𝑛𝑢f𝑎𝑐𝑡𝑢𝑟i𝑛g 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑𝑠
=
𝑇𝑜𝑡𝑎𝑙 𝐵𝑢𝑑g𝑒𝑡𝑒𝑑 𝑑i𝑟𝑒𝑐𝑡 𝑙𝑎𝑏𝑜𝑢𝑟 𝑐𝑙𝑜𝑐𝑘 ℎ𝑜𝑢𝑟𝑠

655 000 * 12
=
131 000

= 𝑅60 𝑝𝑒𝑟 𝑑i𝑟𝑒𝑐𝑡 𝑙𝑎𝑏𝑜𝑢𝑟 𝑐𝑙𝑜𝑐𝑘 ℎ𝑜𝑢𝑟




QUESTION 2
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two
types of solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar
geysers. Letsatsi makes use of an absorption costing system and all types of
inventory are valued using the first-in-first-out method (FIFO). The following
information is available for the financial year ended 30 June 2023:




1. There was no actual and budgeted opening inventory of any type for the 2023
financial year.
2. No actual or budgeted normal material losses occurred in the production process.
3. Letsatsi’s fixed manufacturing overheads (FMO) are allocated based on the budgeted
direct labour clock hours. The total budgeted FMO was R655 000 per month and the
total actual FMO for the year was R9 200 000.

ACCADEMIC NEEDS CONTACT /0651609781

, 4. The budgeted other fixed administrative costs for the division were R2 358 000 per
annum and the actual other fixed administrative costs were R2 400 000.

For question 2 only assume the following:

i. The budgeted fixed manufacturing overheads (FMO) allocation rate per direct
labour clock is R80 per hour.

The total FMO amount included in costs of sales for the 2023 financial year is?

Solution

R
108
Allocated overheads: LowP (80 * 25 000 * ) 3 600 000
60
156
Allocated overheads: HighP (80 * 34 000 * ) 7 072 000
60
Total allocated overheads 10 672 000




QUESTION 3
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two
types of solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar
geysers. Letsatsi makes use of an absorption costing system and all types of
inventory are valued using the first-in-first-out method (FIFO). The following
information is available for the financial year ended 30 June 2023:




ACCADEMIC NEEDS CONTACT /0651609781