MAC3761 ASSIGNMENT 2 OF 2021
NOTE THAT THIS ASSIGNMENT SHOULD BE
PRESENTED IN OWN WAY AS THERE IS RISK
OF PLAGIARISM, HENCE TREAT IT AS A GUIDE
TO CREATING YOUR OWN SOLUTION
QUESTION 1
(a) Revised Income Statement for the Cover Division for the year ended 31 March
2022
Instaheat Grillmaster Total
Covers Covers
R R R
Sales [(𝟏𝟎 𝟎𝟎𝟎 ∗ 𝟐𝟓𝟎); (𝟏𝟐 𝟎𝟎𝟎 ∗ 𝟐𝟑𝟕. 𝟓𝟎)] 2 500 000 2 850 000 5 350 000
Less Variable Cost of Sales (1 793 818) (2 256 182) (4 050 000)
Direct labour 950 000 1 140 000 2 090 000
Direct materials 700 000 910 000 1 610 000
Variable based on labour hours (𝐶1) 112 000 168 000 280 000
Variable based on number of batches (𝐶2) 31 818 38182 70 000
Contribution 706 182 593 818 1 300 000
Less Specific fixed costs (300 000) (425 000) (725 000)
Net profit by product 406 182 168 818 575 000
Less General FMO 375 000
Net Profit 200 000
Calculations
C1. Variable based on labour hours
8 000
Instaheat covers =( ∗ 280 000) = 𝑹𝟏𝟏𝟐 𝟎𝟎𝟎
20 000
12 000
Grillmaster covers =( ∗ 280 000) = 𝑹𝟏𝟔𝟖 𝟎𝟎𝟎
20 000
FOR ACCADEMIC NEEDS CONTACT 065 160 9781/
, C2. Variable based on number of batches
Number of Batches
Batches
10 000
Instaheat ( ) 200
50
12 000
Grillmaster ( )
50 240
440
200
Instaheat covers =( ∗ 70 000) = 𝑹𝟑𝟏 𝟖𝟏𝟖
440
240
Grillmaster covers =( ∗ 70 000) = 𝑹𝟑𝟖 𝟏𝟖𝟐
440
(b) Original budget absorption costing profit statement
Instaheat Grillmaster Total
Covers Covers
R R R
Sales Less Variable Cost of Sales 2 500 000 2 850 000 5 350 000
(2 172 000) (2 978 000) (5 150 000)
Direct labour 950 000 1 140 000 2 090 000
Direct materials 700 000 910 000 1 610 000
Manufacturing overheads 522 000 928 000 1 450 000
Profit / (Loss) 328 000 (128 000) 200 000
The revised profit for instaheat covers increases by R78 182 (406 182 − 328 000)
whilst the grillmaster increases by R296 818 from a loss of (R128 000) to a profit of
R168 818 if the revised budget is used. These increases result from not allocating
the fixed production overheads. The revised budget means that the grillmaster
covers should not be discontinued as they provide a contribution of R168 818
towards the common fixed costs. If the product is discontinued, all other things held
constant, the overall profit of the company will reduce to R31 182 as all the
overheads will now be absorbed by a single product.
FOR ACCADEMIC NEEDS CONTACT 065 160 9781/
NOTE THAT THIS ASSIGNMENT SHOULD BE
PRESENTED IN OWN WAY AS THERE IS RISK
OF PLAGIARISM, HENCE TREAT IT AS A GUIDE
TO CREATING YOUR OWN SOLUTION
QUESTION 1
(a) Revised Income Statement for the Cover Division for the year ended 31 March
2022
Instaheat Grillmaster Total
Covers Covers
R R R
Sales [(𝟏𝟎 𝟎𝟎𝟎 ∗ 𝟐𝟓𝟎); (𝟏𝟐 𝟎𝟎𝟎 ∗ 𝟐𝟑𝟕. 𝟓𝟎)] 2 500 000 2 850 000 5 350 000
Less Variable Cost of Sales (1 793 818) (2 256 182) (4 050 000)
Direct labour 950 000 1 140 000 2 090 000
Direct materials 700 000 910 000 1 610 000
Variable based on labour hours (𝐶1) 112 000 168 000 280 000
Variable based on number of batches (𝐶2) 31 818 38182 70 000
Contribution 706 182 593 818 1 300 000
Less Specific fixed costs (300 000) (425 000) (725 000)
Net profit by product 406 182 168 818 575 000
Less General FMO 375 000
Net Profit 200 000
Calculations
C1. Variable based on labour hours
8 000
Instaheat covers =( ∗ 280 000) = 𝑹𝟏𝟏𝟐 𝟎𝟎𝟎
20 000
12 000
Grillmaster covers =( ∗ 280 000) = 𝑹𝟏𝟔𝟖 𝟎𝟎𝟎
20 000
FOR ACCADEMIC NEEDS CONTACT 065 160 9781/
, C2. Variable based on number of batches
Number of Batches
Batches
10 000
Instaheat ( ) 200
50
12 000
Grillmaster ( )
50 240
440
200
Instaheat covers =( ∗ 70 000) = 𝑹𝟑𝟏 𝟖𝟏𝟖
440
240
Grillmaster covers =( ∗ 70 000) = 𝑹𝟑𝟖 𝟏𝟖𝟐
440
(b) Original budget absorption costing profit statement
Instaheat Grillmaster Total
Covers Covers
R R R
Sales Less Variable Cost of Sales 2 500 000 2 850 000 5 350 000
(2 172 000) (2 978 000) (5 150 000)
Direct labour 950 000 1 140 000 2 090 000
Direct materials 700 000 910 000 1 610 000
Manufacturing overheads 522 000 928 000 1 450 000
Profit / (Loss) 328 000 (128 000) 200 000
The revised profit for instaheat covers increases by R78 182 (406 182 − 328 000)
whilst the grillmaster increases by R296 818 from a loss of (R128 000) to a profit of
R168 818 if the revised budget is used. These increases result from not allocating
the fixed production overheads. The revised budget means that the grillmaster
covers should not be discontinued as they provide a contribution of R168 818
towards the common fixed costs. If the product is discontinued, all other things held
constant, the overall profit of the company will reduce to R31 182 as all the
overheads will now be absorbed by a single product.
FOR ACCADEMIC NEEDS CONTACT 065 160 9781/
