2014_MAFM300_Test_3_Solution complete 100%

SUGGESTED SOLUTION REQUIRED PART 1 ACTUAL PROFIT FOR THE YEAR ENDED 28 FEBUARY 2014 NO OF UNITS PRODUCED AND SOLD 5 900 units REVENUE Sales (given) R 1 829 000 VARIABLE COSTS R 1 368 310 Wood expense (N1)) R 1 158 200 Casual labour (given) R 105 600 VMO Sales commission (N2) (given) R 31 350 R 73 160 CONTRIBUTION R 460 690 FIXED COSTS R 40 250 Supervisor (given) R 35 000 FMO (N8) 5 250 NET PROFIT R 420 440 N1- Wood expense Wood purchased R 1 258 200 Less: Closing stock at standard cost R100/metres x 1000 metres R 100 000 R 1 158 200 N2 - To determine the budgeted variable cost portion and the budgeted fixed cost portion, the high low method must be used (Highest cost - Lowest cost) / (Highest quantity of cost driver - Lowest quantity of cost driver) = m Highest and Lowest costs are given at R 41 000 and R 32 000. Highest quantity = 12 000 hours. Lowest quantity = 9 000 hours (R 41 000 - R 32 000) / (12 000 – 9 000) = m = R 3 per hour y = mx + c, therefore c = y – mx x = 12 000, m = 3 , y = R 41 000 Budgeted fixed cost portion: R 41000 - (R 3 x 12 000) = R 5 000 OR x = 9 000, m = 3, y = R 32 000 Budgeted fixed cost portion: R 32 000 - (R 3 x 9 000) = R5000 Actual FMO =R 5 000 x 1.05 = R5 250 Actual VMO =9 500 hours x R3 x 1.1= R31 350 Actual total MO R36 600 REQUIRED PART 2 STATIC AND FLEXED BUDGETS NO OF UNITS PRODUCED AND SOLD REVENUE Sales FOR THE YEAR ENDED 28 (N1) (N2) FEBUARY 2014 6000 units R 1 800 000 5 900 units R 1 770 000 VARIABLE COSTS R 1 425 000 R 1 401 250 Wood (N3) (N4) R 1 200 000 R 1 180 000 Casual labour (N5) (N6) R 108 000 R 106 200 VMO (N8) R27 000 R 26 550 Sales commission (N9) R 90 000 R 88 500 CONTRIBUTION R 375 000 R 368 750 FIXED COSTS R 41 000 R 41 000 Supervisor (N7) R 36 000 R 36 000 FMO (N8) 5 000 5 000 NET PROFIT R 334 000 R 327 750 N1 - Budgeted price per chairs x budgeted number of chairs made and sold R300 x 6000 chairs = R 1 800 000 N2 - Budgeted price per chairs x actual number of chairs made and sold R300 x 5 900 chairs = R 1 770 000 N3- Budgeted price of wood per chairs x budgeted number of chairs made and sold R100/metres x .2 metres x 6 000 chairs = R N4- Budgeted price of wood per chairs x actual number of chairs made and sold R100/metres x 2 metres x 5 900 chairs = R 1 180 000 N5- Budgeted wage rate x number of hours per chair x budgeted number of chairs made and sold R12/hour x 1.5hours x 6 000 chairs = R 108 000 N6 - Budgeted wage rate x number of hours per chair x actual number of chairs made and sold R12/hour x 1.5 hours x 5 900 chairs = R 106 200 N7- Budgeted supervisors cost wage rate on flexed budget R 3 000 per month x 12 months = R 36 000 N8 - To determine the budgeted variable cost portion and the budgeted fixed cost portion, the high low method must be used (Highest cost - Lowest cost) / (Highest quantity of cost driver - Lowest quantity of cost driver) = m Highest and Lowest costs are given at R 41 000 and R 32 000. Highest quantity = 12 000 hours. Lowest quantity = 9000 hours (R 41 000 - R 32 000) / (12 000 – 9 000) = m = R 3 per chair y = mx + c, therefore c = y – mx x = 12000, m = 3 , y = R 41 000 Budgeted fixed cost portion: R 41000 - (R 3 x 12 000) = R 5 000 OR ..........................................continued....................................................