MAC2602 ASSIGNMENT 2 COMPLETE ANSWERS
STUDY GUIDE 2025/2026 VERIFIED SOLUTIONS AND
CORRECT DETAILED ANSWERS || 100%
GUARANTEED PASS <LATEST VERSION>
PART 1: Core Cost Concepts & Classifications
Q1: What is the primary difference between a period cost and a product cost?
A: Product costs are those directly tied to the production or purchase of
inventory (e.g., direct materials, direct labor, manufacturing overhead) and are
recorded as an asset (inventory) until the product is sold. Period costs are all other
costs incurred during an accounting period (e.g., selling and administrative
expenses) and are expensed in the period they are incurred.
Q2: Why is the distinction between variable and fixed costs crucial for
management decision-making?
A: This distinction is vital because it affects cost behavior. Variable costs
change with the level of activity, allowing managers to forecast costs at different
production volumes. Fixed costs remain constant in the short term, which is
essential for break-even analysis, budgeting, and pricing decisions.
,Q3: A cost that remains constant in total within a relevant range of activity is
a:
A: Fixed cost.
Q4: Direct labor and direct materials are prime examples of what type of
cost?
A: Prime costs.
Q5: Manufacturing overhead, combined with direct labor, is known as:
A: Conversion costs.
PART 2: Cost-Volume-Profit (CVP) Analysis
Q6: The break-even point in units is calculated as:
A: Total Fixed Costs / Contribution Margin per Unit.
Q7: What does the Margin of Safety measure?
A: It measures the "cushion" or the amount by which actual or budgeted sales
can drop before the company incurs a loss. It is calculated as (Actual Sales -
Break-even Sales).
Q8: If a company's contribution margin ratio is 40%, how much sales revenue
is needed to achieve a target profit of R100,000 with fixed costs of R200,000?
, A: Required Sales = (Fixed Costs + Target Profit) / Contribution Margin Ratio
= (R200,000 + R100,000) / 0.40 = R750,000.
Q9: A company sells a product for R50 per unit. Variable costs are R30 per
unit, and fixed costs are R100,000. What is the break-even point in units?
A: Contribution Margin per Unit = R50 - R30 = R20. Break-even Units =
R100,000 / R20 = 5,000 units.
Q10: How does an increase in variable costs per unit affect the break-even
point?
A: An increase in variable costs per unit decreases the contribution margin per
unit. This, in turn, increases the break-even point because more units must be sold
to cover the fixed costs.
PART 3: Job-Order and Process Costing
Q11: Which costing system is used when products are manufactured in a
continuous, mass-production process?
A: Process Costing.
Q12: In a job-order costing system, what document is used to record the
direct materials, direct labor, and manufacturing overhead costs assigned to a
STUDY GUIDE 2025/2026 VERIFIED SOLUTIONS AND
CORRECT DETAILED ANSWERS || 100%
GUARANTEED PASS <LATEST VERSION>
PART 1: Core Cost Concepts & Classifications
Q1: What is the primary difference between a period cost and a product cost?
A: Product costs are those directly tied to the production or purchase of
inventory (e.g., direct materials, direct labor, manufacturing overhead) and are
recorded as an asset (inventory) until the product is sold. Period costs are all other
costs incurred during an accounting period (e.g., selling and administrative
expenses) and are expensed in the period they are incurred.
Q2: Why is the distinction between variable and fixed costs crucial for
management decision-making?
A: This distinction is vital because it affects cost behavior. Variable costs
change with the level of activity, allowing managers to forecast costs at different
production volumes. Fixed costs remain constant in the short term, which is
essential for break-even analysis, budgeting, and pricing decisions.
,Q3: A cost that remains constant in total within a relevant range of activity is
a:
A: Fixed cost.
Q4: Direct labor and direct materials are prime examples of what type of
cost?
A: Prime costs.
Q5: Manufacturing overhead, combined with direct labor, is known as:
A: Conversion costs.
PART 2: Cost-Volume-Profit (CVP) Analysis
Q6: The break-even point in units is calculated as:
A: Total Fixed Costs / Contribution Margin per Unit.
Q7: What does the Margin of Safety measure?
A: It measures the "cushion" or the amount by which actual or budgeted sales
can drop before the company incurs a loss. It is calculated as (Actual Sales -
Break-even Sales).
Q8: If a company's contribution margin ratio is 40%, how much sales revenue
is needed to achieve a target profit of R100,000 with fixed costs of R200,000?
, A: Required Sales = (Fixed Costs + Target Profit) / Contribution Margin Ratio
= (R200,000 + R100,000) / 0.40 = R750,000.
Q9: A company sells a product for R50 per unit. Variable costs are R30 per
unit, and fixed costs are R100,000. What is the break-even point in units?
A: Contribution Margin per Unit = R50 - R30 = R20. Break-even Units =
R100,000 / R20 = 5,000 units.
Q10: How does an increase in variable costs per unit affect the break-even
point?
A: An increase in variable costs per unit decreases the contribution margin per
unit. This, in turn, increases the break-even point because more units must be sold
to cover the fixed costs.
PART 3: Job-Order and Process Costing
Q11: Which costing system is used when products are manufactured in a
continuous, mass-production process?
A: Process Costing.
Q12: In a job-order costing system, what document is used to record the
direct materials, direct labor, and manufacturing overhead costs assigned to a
