COLLEGE : Business and Economics

DEPARTMENT : Commercial Accounting

CAMPUS : SWC

MODULE : CFM22B2
COST AND FINANCIAL MANAGEMENT 2B

SEMESTER : Second

EXAM : November 2018

DATE : 17 NOVEMBER 2018 SESSION : 08:00-11:00

ASSESSOR(S) : MRS M NEVHUTANDA, MRS M VERMAAK, MRS J WEST

MODERATOR : MS M J v RENSBURG

DURATION : 3 HOURS MARKS : 100

NUMBER OF PAGES: 9 PAGES

INSTRUCTIONS:

1. Answer ALL THE QUESTIONS.

2. Number your answers clearly.
3. Show all calculations, workings and formulas clearly.
4. Start each question on a new page.
5. Both the use of Tippex and writing in pencil and red pen are prohibited.
6. Scratch out any blank spaces.
7. Silent, non-programmable calculators may be used.
8. Round all calculations to two decimal places unless otherwise instructed.
9. INDICATE YOUR INDEX NUMBER IN THE TOP MIDDLE OF YOUR
SCRIPT.

Question 1 Direct and absorption costing 20 36 minutes

Question 2 Joint and by-products 20 36 minutes
Question 3 Process costing 13 23 minutes
Question 4 Process costing 27 49 minutes
Question 4 Job costing 20 36 minutes
100 180 minutes
 CFM22B2 NOV 2018

QUESTION 1 20 MARKS

Nascar Motors assembles and sells dinky toy cars.

Data relating to April and May 2018 are:

Unit data April May

Opening inventory 250 ?
Production 5 000 5 500
Closing inventory ? ?
Sales ? 5 800

Production costs for April 2018:

Description Comment Total Cost R/unit

Direct material Increased with 5% on 1 May 2018 R40 000 R8.00
Direct labour Increased with 8% on 1 May 2018 R50 000 R10.00
Variable manufacturing No increase R37 500 R7.50
overheads
Marketing cost Based on units sold R11 250 ?

Fixed administration cost No increase R25 000

Actual fixed manufacturing Increased with 10% on 1 May R29 000

overhead cost 2018

Additional information that is available:

Nascar Motors uses direct labour cost as allocation basis for its fixed manufacturing overhead
cost. In 2018 the budgeted fixed manufacturing overhead cost was R400 000 and the
budgeted direct labour cost was R800 000.

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 CFM22B2 NOV 2018

REQUIRED:

1.1. Determine the flow of units for April and May 2018. (2)
1.2. Calculate the total manufacturing cost per unit for April and May based on (6)
direct and absorption costing principles. Clearly distinguish between the
variable and fixed unit cost.
1.3. Prepare a statement of comprehensive income for May using the direct (7)
costing system.
1.4. Reconcile the profits based on your answers in question 3 and the information (5)
below.
In May 2018, the profit based on the aborption costing method was R34 320.

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 CFM22B2 NOV 2018

QUESTION 2 20 MARKS

The Wood Spirits company produces two products, turpentine and methanol (wood alcohol),
in a joint process. Joint cost amount to R120 000 per batch of output. Each batch totals 10 000
litres: consisting of 25% methanol and 75% turpentine. Both products are processed further
without any gain or loss in volume. Separable processing costs are R3 per litre for methanol,
and a total of R15 000 for turpentine. Methanol sells for R21 per litre and turpentine sells for
R14 per litre. The Wood Spirits company produced one batch during the period.

REQUIRED:

2.1. Calculate the total cost per unit for the joint products of Wood Spirits company (7)
based on the physical unit method.
2.2. Calculate the total cost per unit for the joint products of Wood Spirits company (9)
based on the relevant market value method.
2.3. Calculate the gross profit percentage for product Methanol, based on the (4)
relative market value method.

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 CFM22B2 NOV 2018

QUESTION 3: 13 MARKS

Mr. Trolley manufacture shopping trolleys.

The process start where plastic pellets are

heated in a pot. The liquid plastic is then
injected into a mold to form the basket body
of the trolley.

When the process is 35% completed, aluminum pipes are cut, bent and welded together to
form the structure of the trolley. All parts are inspected at 48%. The rubber wheels and handles
are fitted when the process is 80% complete. The completed trolleys are transferred to the
finished goods storeroom. A normal loss of 2% occur at the inspection point. Conversion takes
place evenly throughout the process.

At the beginning of September 2018 Mr. Trolley had 3 750 trolleys in process that was 53%
completed. During September Mr. Trolley started 50 000 new trolleys. At the end of September
10% of the trolleys started were at 42% of the process, 47 250 trolleys were transferred to the
finished goods storeroom. Mr. Trolley uses first-in-first-out inventory valuation.

REQUIRED:

3.1 Prepare the timeline, clearly indicating the flow of units, loss and the (4)
materials needed for production.
3.2 Calculate the normal and abnormal loss. (2)
3.3 Prepare Step 2: Equivalent unit report. (7)

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 CFM22B2 NOV 2018

QUESTION 4: 27 MARKS

Mr Recliner manufactures reclining chairs and

inventory is valued based on first in first out
principles.

The four components of the recliner include: the frame made out of wood, reinforced with
metal nuts, bolts and metal springs for the seat, the metal activating mechanism, which
converts the chair into a recliner, the foam is used as padding for the frame and seat. Leather
is used to cover the frame and foam. The frame and metal mechanisms are assembled in the
carpentry department. The units are then transferred to the upholstery department.

Carpentry department:

In the upholstery department foam bodies are sculpted when the process is 26% complete.
When the process is 55% complete, sewers stitch all leather pieces together. All the
components are fitted together during the final assembly process. Conversion costs are
incurred evenly throughout both departments.

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 CFM22B2 NOV 2018

At the beginning of August Mr Recliner had 1 500 recliners in the carpentry department that
were 60% completed and at the end of August, 1 600 recliners were 54% completed. During
the month 9 050 recliners were transferred to the upholstery department. At the beginning of
August the upholstery department had 850 recliners that were at the 46% stage of the process
and 1 250 recliners were still in process at the 76% stage of the production process at the end
of August.

The 1 500 recliners that were in the carpentry department on the 1st of August accumulated a
total cost of R609 000, of which R477 000 was towards conversion cost. During August frames
was purchased at R110 per frame, the total cost of the steel mechanisms were R1 991 000
and conversion costs amounted to R4 777 420.

The following cost information is available for the upholstery department, that completed a
total of 8 650 recliners, for August.
Step 3: Cost incurred
Description Total Carpentry Foam Leather Conversion
Work in process R1 339 770 R731 000 R110 500 R314 500 R183 770
Current cost R17 004 480 R7 783 000 R1 131 250 R3 762 000 R4 328 230

REQUIRED:

4.1 Determine the equivalent units and show the cost incurred during the month (8)
for the carpentry department.
4.2 Prepare the cost and production statement for the upholstery department. (19)

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 CFM22B2 NOV 2018

QUESTION 5: 20 MARKS

Orchid Ltd produces special machines according to customers specifications. On the 30th June
the following figures were extracted from their records:

The work in process consisted of two unfinished jobs in which the following costs had been
incurred:
Cost element Mavis Jabulani
Direct material R23 000 R11 000
Direct labour R18 000 R13 000
Manufacturing overheads R12 500 R9 500

Manufacturing overheads are recovered on the basis of labour hours for the six-month period
ending 31 December. The budgeted manufacturing overheads for this period would be
R120 000, based on 40 000 direct labour hours. During July, two new jobs were started: Zinzi
and Bulelwa. Costs incurred and labour hours worked during July are as follows:
Details Mavis Jabulani Zinzi Bulelwa
Direct material cost R1 800 R3 500 R5 400 R7 600
Direct labour cost R2 200 R6 000 R9 300 R8 000
Direct labour hours 800 2 200 2 800 2 100

Other overheads:
Electricity R7 000
Depreciation on plant and equipment R4 800
Insurance on office computers R3 500
Repairs and maintenance on plant and equipment R2 000
(Electricity bill is aportioned on a 7:3 ratio for the factory and the display shop respectively.)

Mavis and Jabulani’s machines were completed and sold at R52 000 and R68 000
respectively. Orchid Ltd were still busy making the machinery for their two clients Zinzi and
Bulelwa.

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 CFM22B2 NOV 2018

REQUIRED:

5.1 Calculate the predetermined overhead recovery rate (POR) for July and the
applied manufacturing overhead cost for each job. (6)
5.2 Prepare the job cost card for Jabulani for the month of July. (4)
5.3 Prepare the work in process account for Bulelwa on 31 July. (3)
5.4 Prepare the manufacturing overheads control account for Crystals Ltd,
clearly indicate the over or under applied overheads. (7)

TOTAL / 100 MARKS

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