MAC3761/Assignment01/0/2021

MAC3761
MANAGEMENT ACCOUNTING III
COMPULSORY ASSIGNMENT 01/2021
Academic Type Assignment Due date Unique
Year number number
2021 MCQ 01 3 May 2021 662442

Before attempting this assignment:

 Study the relevant topics in the study material as indicated on page 17 of Tutorial Letter
101/2021.
 Take note that, as prerequisites for MAC3761, both MAC2601 and MAC2602 form part of
an important foundation on which MAC3761 builds. The MAC2601 and MAC2602 study
materials are therefore regarded as prior knowledge and all the work covered in MAC2601
and MAC2602 is examinable in MAC3761 (whether or not it was revisited in MAC3761). It
is for this reason that this assignment includes revision of some of the work covered in
MAC2601 and MAC2602.
 You are reminded that this assignment is not a group assignment and must be your own
work.

THE MARK YOU EARN FOR THIS COMPULSORY ASSIGNMENT 01 WILL WEIGH 10%
IN THE CALCULATION OF YOUR YEAR MARK.

 The marks earned for your formative assessments carry the following weights in the
calculation of your year mark:

Formative assessment Weights

Assignment 01 10%
Year test 70%
Assignment 02 20%
Total 100%

 Complete this assignment on the online mark-reading sheet. Mark-reading sheets can
only be submitted electronically via myUnisa. Refer to the brochure Study@Unisa for
information on submitting multiple choice assignments online (via myUnisa). Also refer
to section 8.3 of Tutorial Letter 101/2021.
 You can also refer to this link on how to submit online assignments on myUnisa:
https://www.unisa.ac.za/sites/myunisa/default/Assignments-&
Examination/Assignments/Assignment-submission-with-myUnisa
 Take note to submit this assignment using the correct unique number (662442) on
myUnisa.
 This assignment consists of 40 multiple-choice questions. Each question counts 1 mark,
and the entire assignment counts 40 marks in total. All questions must be answered.
Consider each question independently unless specific reference is made to the contrary.

 Each question has only one correct answer from the given options.

[TURN OVER]
 MAC3761/Assignment01/0/2021
Use the following information to answer questions 1 to 15 (all inclusive):

Industrial Printers Limited’s (“InduPrint”) overall organisational activities and processes aimed at value
creation for its shareholders and stakeholders are the manufacturing of paper and the large-scale
printing of paper solutions. In the main, the manufacturing of the paper takes place at the company’s
plantation while the printing activities relates to the printing of: personnel diaries; promotional,
advertising and awareness banners; workshop study materials; training manuals; and policy documents
for various corporate entities and government institutions. The company provides, transforms and
employs the following six “system of inputs” through its organisational activities: (i) short and long-term
financing resources (cash, debt and equity); (ii) paper manufacturing infrastructure, plant, and
equipment; (iii) paper manufacturing patents, copyrights and self-developed technologies; (iv)
management staff and blue-collar workers; (v) a network of established relationships with various
institutions, communities, and stakeholders; and (vi) plantation (land) and irrigation water.
As part of selecting the most appropriate strategy for the company, InduPrint’s management assessed
both the internal and external environments within which the company operates. This assessment
included the following amongst others, the desired company culture; possible regulatory impediments;
identification of suppliers and materials; decision on product offering; the rate of industry’s technological
advancement; and envisaged competitive position. In this regard, it was noted with concern that while
adequate mitigating measures are in place for internal environment risks, the external environment
poses the most significant risks to the company’s growth prospect. In responding to the strategic analysis
of the risks relating to both internal and external environment of the company, InduPrint adopted a
strategy that is grounded on (i) alliances; (ii) new markets and organic growth; and (iii) acquisitions.
To minimise the impact of its carbon emission, InduPrint is situated in a remote industrial area. The
company powers its operation with the electricity supplied by the country’s power utility. However, due
to ongoing loadshedding, the company’s growth prospect is at risk. As such, InduPrint is considering
investing in 20 wind turbines. According to InduPrint, this investment is poised to reduce the prevalence
of business disruptions resulting from power-outages and subsequently improve the company’s
competitive edge through achieving one of its strategic objectives of “commitment to environmentally
friendly operations through renewable energy”. The proposed 20 turbines will be acquired from and
installed by an overseas-based company at a cost of €73 500 per turbine. The exchange rate applicable
to this purchase and installation is R1: €0,0525. The investment in the turbines will first be funded by all
the cash resources available as at 31 March 2021. The resulting shortfall (if any) will be funded by a
combination of the existing long-term funding instruments in accordance with the book value capital
structure as at 31 March 2021. Where necessary, in funding this investment, ordinary shares will be
issued at their market price as at 31 March 2021. InduPrint has access to R20 million bank overdraft
facility for short-term funding requirements only. This facility is only used if cash resources are depleted.

Summary of complete statement of financial position (balance sheet) as at 31 March 2021:

Year-ending 2021 2020 2019
Details Notes R’000 R’000 R’000
Bank and cash/ (bank overdraft) 4 500 4 050 (3 800)
All other assets ? ? ?
Ordinary share capital 1 73 500 73 500 73 500
Retained earnings/(loss) 1 5 700 3 200 (850)
8,5% Preference share capital 2 7 800 7 800 7 800
Long-term loan 3 20 000 20 000 20 000
7,5% Debentures at coupon value 4 ? ? ?
Trade and other payables 5 500 5 800 4 950
Dividends declared and payable 5 12 663 11 913 3 663

[TURN OVER]
 MAC3761/Assignment01/0/2021

Notes and information relating to the above summary of statement of financial position:

1. The company does not plan to adjust its authorised number of ordinary shares of 16 455 155. Shares
were issued at an average historical cost of R4,90 per share. On 31 March 2021, InduPrint’s dividend
yield was 10% while the expected future growth rate of the ordinary dividends was determined at
5% per annum.

2. 2,6 million redeemable preference shares are in issue since incorporation. All these preference
shares will be redeemed on 31 March 2024 at their nominal value. On 31 March 2021, the annual
dividend rate of similar preference shares was 8,2%.

3. Four years ago, CapuTrech Bank advanced a long-term loan to InduPrint at a fixed interest rate of
8% per annum. On 31 March 2021, similar long-term loans were issued at a fixed interest rate of
7,25% per annum.

4. InduPrint has 500 000 debentures at a coupon value of R50 each in issue. During each financial
year, interest on these debentures is paid in arrears and in equal quarterly instalments. All these
debentures will be redeemed at a premium of 2% on their coupon value in five years’ time from now
(InduPrint’s latest balance sheet date). On 31 March 2021, these debentures were worth
R26,5 million.

5. Both ordinary and preference dividends are declared on 31 March each year and are subsequently
fully paid on 15 June of that year. To date, no dividends from previous periods are owing.

6. Corporate taxation rate is 28% and operating days were 365 days in 2021, 366 days in 2020 and
365 days in 2019. Where applicable, interest rates are pre-tax unless stated otherwise.

7. InduPrint’s management accountant (Mr Rotertram) started but unfortunately was unable to
complete Table YX below regarding the company’s calculation of the weighted average cost of
capital (WACC). Mr Rotertram has since approached you for assistance to complete the table.

Table YX: InduPrint’s WACC calculation as at 31 March 2021:

Capital structure Values Weight Cost of WACC
Rmil capital %
Ordinary share capital ? ? (d) ?
Preference share capital (a) ? ? ?
Long-term loan (b) (c) ? ?
Debentures 26,5 ? (e) ?
Total ? ? ?

QUESTION 1

“Industrial Printers Limited’s (“InduPrint”) overall organisational activities and processes aimed at value
creation for its shareholders and stakeholders are the manufacturing of paper and the large-scale
printing of paper solutions”

The above statement provides a description that explains InduPrint’s ___________

(1) integrated thinking.

(2) organisational structure.
(3) business model.
(4) risk management.
(5) none of the above options.

[TURN OVER]
 MAC3761/Assignment01/0/2021
QUESTION 2

Regarding InduPrint’s value creation process and by reference to the company’s organisational
activities, in the below matrix, the most accurate combination of the InduPrint’s “system of inputs” is
option ___________

“System of Options
inputs” –
reference (1) (2) (3) (4) (5)
number
(i) Financial Financial Financial Financial Financial
(iii) Manufactured Manufactured Intellectual Intellectual Property
(iv) Human Intellectual Employee Human Society
(vi) Social Natural Social Natural Manufactured

QUESTION 3
As part of selecting the most appropriate company strategy, the assessment of InduPrint’s external
environment would have included the following aspects amongst others ___________

(1) competitive position; company culture; and regulatory impediments.

(2) regulatory impediments; competitive position; and industry’s technological advancement.
(3) product offering; identification of suppliers and materials; and company culture.
(4) industry’s technological advancement; regulatory impediments; and company culture.
(5) natural environment; demographic composition; and governance regime.

QUESTION 4
After considering the external and internal environment, and in responding to the identified risks,
InduPrint identified and adopted ___________ as the most appropriate strategy option for the company.

(1) an information technology strategy

(2) a growth strategy
(3) a competitive strategy
(4) a product-market strategy
(5) none of the above options.

QUESTION 5
InduPrint’s strategic objective of “commitment to environmentally friendly operations through renewable
energy” can be regarded as a ___________ strategy type.

(1) corporate
(2) financial
(3) functional
(4) business
(5) none of the above options.

QUESTION 6
The total portion of the purchase and installation cost of the proposed investment in the 20 wind turbines
that is to be financed by InduPrint’s existing long-term funding instruments is ___________

(1) R23 500 000.

(2) R18 000 000.
(3) R28 000 000.
(4) R14 700 000.
(5) none of the above options.
[TURN OVER]
 MAC3761/Assignment01/0/2021
QUESTION 7

Assuming that the portion of purchase and installation cost to be financed by a combination of the
existing funding instruments is R25,587 million, the amount of long-term debt (round percentages to
nearest number) to be raised would be ___________

(1) R6 652 620.

(2) R10 746 540.
(3) R10 490 670.
(4) R10 234 800.
(5) none of the above options.

QUESTION 8

Assuming that the portion of purchase and installation cost to be financed through the fresh issue of
ordinary shares is R15,096 million, the number of ordinary shares (rounded to the nearest number) that
InduPrint must issue for financing the turbines is ___________

(1) 3 358 195.

(2) 1 887 000.
(3) 1 455 155.
(4) 3 080 816.
(5) none of the above options.

QUESTION 9
Based on the statement of financial position at 31 March 2021, InduPrint’s net interest-bearing debt to
equity ratio (final answer rounded to two decimal places) is ___________

(1) 0,67: 1.
(2) 0,63: 1.
(3) 0,47: 1.
(4) 0,61: 1.
(5) none of the above options.
QUESTION 10

Which one of the following statements is incorrect regarding the R20 million bank overdraft facility?
(1) If utilised, this utilised portion should be part of InduPrint’s permanent capital structure.
(2) If needed, it can be used by InduPrint to finance movements in trade debtors.
(3) InduPrint can classify any utilised portion as part of trade and other payables.
(4) It can be used to purchase printing paper for printing jobs of corporate clients.
(5) none of the above options.

QUESTION 11
Regarding Table YX above, the correct value (final answer rounded to the nearest hundred thousand
Rand) as represented by (b) is ___________

(1) R22,1 million.

(2) R29,5 million.
(3) R18,1 million.
(4) R33,5 million.
(5) none of the above options.

[TURN OVER]
 MAC3761/Assignment01/0/2021
QUESTION 12

Regarding Table YX above, the correct value (final answer rounded to the nearest hundred thousand
Rands) as represented by (a) is ___________

(1) R11,4 million.

(2) R10,8 million
(3) R8,1 million.
(4) R7,9 million.
(5) none of the above options.

QUESTION 13
Assuming a capital structure of 33,333%: 66,667% and a market value of R11,4 million for the
preference share capital regarding Table YX above, the correct value (answers rounded to two decimal
places) as represented by (c) would be ___________
(1) 0,06.
(2) 0,12.
(3) 0,18.
(4) 0,02.
(5) none of the above options.

QUESTION 14
Regarding Table YX above, the correct value (final answer rounded to two decimal places) as
represented by (e) is ___________

(1) 6,43%.
(2) 4,42%.
(3) 6,10%.
(4) 4,40%.
(5) none of the above options.

QUESTION 15
Regarding Table YX above, the correct value (final answer rounded to two decimal places) as
represented by (d) is ___________
(1) 15,00%.
(2) 5,75%.
(3) 15,50%.
(4) 10,00%.
(5) none of the above options.

Use the following information to answer questions 16 to 19 (all inclusive):

WCM (Pty) Ltd (“WCM”) is a company that manufactures and sells mobile phones and tablet devices.
During the last quarter of the 2020 financial year the company went on a high-impact marketing drive to
advertise and subsequently launch its two newest devices (“TinAge Fix” and “Curfew Master”). To no
surprise, these two new devices proved to be immensely popular among the teenagers and parents.
Teenagers love TinAge Fix mainly because it offers (i) top-quality high-resolution camera; (ii) long-
battery life; (iii) free access to various social media applications; and (vi) a teenage-lifetime data of 10
gigabytes per month. On the other hand, the majority of parents are interested in the Curfew Master
because of its pre-loaded 24-hour free “child-tracking app” that can be downloaded on any smart mobile
device and linked to any participating security response services.

[TURN OVER]
 MAC3761/Assignment01/0/2021

WCM’s Management Accountant and Financial Manager extracted the below information from the
company’s 2020 management accounts.

Extract from WCM’s management accounts for the financial year ended 29 February 2020:
Details Notes 2020
Total revenue 1 R47 925 000
Total purchases 2 R32 024 025
Finished goods inventory (1 March 2019) 3 R1 188 000
Finished goods inventory (29 February 2020) 3 R1 581 525
Inventory turnover (times) 5 20
Trade debtors’ collection period (days) 5 36,39
Trade payable days 5 46,44
Operating days 366
Notes and additional information:
1. Included in total revenue is R38 340 000 for total credit sales.
2. All purchases are on credit.
3. WCM’s inventory relates to finished goods only.
4. Below is some of the information relating to the forthcoming 2021 financial year:
On the back of the success of the two new devices and the resulting increase in sales, WCM is
anticipating possible additional investment in working capital. This view is based on the following:
4.1. WCM expects total revenue to grow by 12%.
4.2. Cash sales will average 35% of credit sales.
4.3. The gross profit margin for the 2021 financial year is expected to be 200 basis points more than
the actual gross profit margin of the 2020 financial year level.
4.4. All purchases are on credit. WCM has only one supplier, and the supplier has agreed to
increase the trade payables’ period by 10 days for the 2021 financial year.
4.5. Where applicable, the actual closing balances for the 2020 financial year are brought forward
for the determination of the 2021 financial year forecasts.
4.6. Closing balances for the 2021 financial year are forecasted at R6 550 000 for trade debtors,
R3 105 855 for finished goods inventory and R1 250 000 for bank overdraft.
4.7. There are 365 operating days in the 2021 financial year.
5. The company uses book values and closing balances in analysing the ratios. Where applicable, the
number of “days” and/or “times” for ratio calculations must be rounded to two decimal places.

QUESTION 16
WCM’s expected total credit sales amount for the 2021 financial year is ___________
(1) R39 760 000.
(2) R42 600 000.
(3) R34 889 400.
(4) R42 940 800.
(5) none of the above options.

[TURN OVER]
 MAC3761/Assignment01/0/2021

QUESTION 17
WCM’s trade debtors’ collection period for the 2021 financial year is expected to be ___________ days.

(1) 68,52
(2) 56,12
(3) 60,13
(4) 55,68
(5) none of the above options.
QUESTION 18
WCM’s inventory turnover for the 2021 financial year is expected to be ___________ times.

(1) 11,37
(2) 11,28
(3) 20,00
(4) 11,06
(5) none of the above options.
In answering question 19 only, assume that the forecasted cost of sales for the 2021 financial
year is R36,16 million while all the other applicable information remains as is.

QUESTION 19

WCM’s forecasted closing balance for the net working capital (final answer rounded to the nearest Rand)
for the 2021 financial year is ___________

(1) R2 814 722.

(2) R3 828 722.
(3) R2 578 722.
(4) R5 078 722.
(5) none of the above options.

Use the following information to answer question 20 only:

Tricycles are one of Toyz-R4-Fun (Pty) Ltd (“T4F”) most popular toys. T4F buys the components of the
tricycles (frames, wheels and seats) separately and subsequently assemble these components into
tricycles for sale. For the upcoming financial year, the annual market demand for T4F’s tricycles is
uncertain, however, there is a 30% probability that it will be 500 000 tricycles; a 25% probability that it
will be 600 000 tricycles; and a 45% probability that it will be 400 000 tricycles. T4F uses the economic
order quantity (EOQ) technique to manage tricycles wheels’ inventory. In this regard, the following
information is made available for the upcoming financial year: (i) cost of placing each order is R360; (ii)
storage costs per wheel per annum is R2,40; (iii) insurance costs per wheel per annum is R1,00; (iv)
purchase price per wheel is R20; and (v) safety inventory is based on 25 fully assembled tricycles. The
applicable cost of capital rate is 8% per annum.

QUESTION 20

T4F’s total cost to implement the EOQ technique in the upcoming financial year is ___________

(1) R41 665.

(2) R72 375.
(3) R41 790.
(4) R72 100.
(5) none of the above options.

[TURN OVER]
 MAC3761/Assignment01/0/2021

Use the following information to answer questions 21 to 30 (all inclusive):

Dinaka-tša-Kgomo Cements (Pty) Ltd (“Dinaka”) manufactures and sells two types of cements, namely
Heavy-Duty cement (“HeavyD”) and Light-Duty cement (“LightD”). Each unit of HeavyD is 50 kilograms
(kg) of cement while each unit of LightD is 40 kilograms of cement. Dinaka’s year-end is 30 April. Until
30 April 2020, Dinaka had always operated an absorption costing system, however, on 1 May 2020, the
company changed to direct costing system. On 1 May 2020, all the applicable historical values of
Dinaka’s financial records were retrospectively adjusted to reflect the direct costing system. Dinaka
values its inventory using first-in-first-out (FIFO).
Dinaka uses a premixed cement mixture (premix) as the primary raw material and a secret ingredient
as the secondary raw material. Premix is bought in kilograms only. On the delivery of the premix, 4% of
the purchased kilograms is lost and thus not introduced into the manufacturing of the cements. No other
losses occur. One kg of the introduced premix yield one kg of cement. The addition of the secondary
raw material does not increase or decrease the volume of the premix or the volume of the cement.
According to Dinaka’s historical costing system, the company allocated the fixed manufacturing
overheads (FMO) on a predetermined rate based on the budgeted machine mixing time. The standard
machine mixing times are 0,6 hours per unit of HeavyD and 0,4 hours per unit LightD.

The following represents some of the information that was used to prepare Dinaka’s actual
results for the 2021 and 2020 financial years:

1. An extract from the management accounts of the 2021 and 2020 financial years:
Financial year (FY) 2021 2020
Actual cost details per unit HeavyD LightD HeavyD LightD
Primary raw material costs (including cost of loss)> 14,00 11,20 12,50 10,00
Secondary raw material costs 11,00 4,00 10,00 3,00
Machine mixing costs ? ? 63,00 42,00
Other variable manufacturing costs 34,00 32,00 32,00 30,00
Variable distribution costs ? ? 5,00 5,00
Total variable costs per unit ? ? R122,50 R90,00
Financial year (FY) 2021 2020
Selected units’ details HeavyD LightD HeavyD LightD
Budgeted annual manufacturing units>>>>>>>>> 58 000 290 000 52 000 208 000
Budgeted annual sales units 54 400 217 600 41 600 166 400
Actual opening inventory units 10 000 40 000 6 500 26 000
Actual annual manufacturing units 70 000 280 000 ? ?

2. The actual selling prices per unit for the 2021 FY were R153 for HeavyD and R116 for LightD.
3. 20% of all cement units the manufactured during each financial year are only sold in the immediate
subsequent financial year. Dinaka’s inventory relates to finished goods only.
4. Dinaka considers premix losses as normal losses and thus a product cost.
5. Amongst other items, included in the “other variable manufacturing costs” are direct labour costs,
packaging costs and variable manufacturing overheads.

6. Where applicable, the actual machine mixing time per unit per product were the same as the related
standard machine mixing time. The actual machine mixing costs per hour for the 2021 FY was R3
more than the actual machine mixing costs per hour of the 2020 FY.

[TURN OVER]
 MAC3761/Assignment01/0/2021

7. The total FMO budget for the 2021 FY was established based on the cost of R44 per budgeted
machine mixing hour while the total FMO budget for the 2020 FY was R5 148 000. The actual FMO
were R6 500 000 in the 2021 FY and R5 000 000 in the 2020 FY.
8. The distribution costs of the cements are semi-variable costs. The budgeted total fixed distribution
costs for the 2021 FY were R500 000. In the 2021 FY, the actual unit variable distribution costs were
5% more than the actual unit variable distribution costs of the 2020 FY. The total actual distribution
costs for the 2021 FY was R2 233 000.

QUESTION 21
The total actual manufacturing units of LightD for the 2020 FY are ___________
(1) 200 000.
(2) 224 000.
(3) 272 000.
(4) 280 000.
(5) none of the above options.

QUESTION 22
Based on Dinaka’s historical costing system (absorption costing), the actual closing inventory (Rand
value) for product HeavyD as at 30 April 2020 was ___________

(1) R1 225 000.

(2) R1 445 000.
(3) R1 495 000.
(4) R1 625 000.
(5) none of the above options.

QUESTION 23
In accordance with the manufacturing requirements of the actual manufacturing units for the 2021 FY,
Dinaka would have purchased __________ kilograms of premix (workings rounded to the nearest full
kilogram).

(1) 13 125 500

(2) 14 112 000
(3) 15 288 000
(4) 15 312 500
(5) none of the above options.

QUESTION 24
In determining LightD’s actual closing inventory (Rand value) for the 2021 FY, the actual premix costs
to use are ___________ per kilogram.

(1) R0,28
(2) R0,29
(3) R0,22
(4) R0,25
(5) none of the above options.

[TURN OVER]
 MAC3761/Assignment01/0/2021

QUESTION 25
Dinaka’s total actual sales (Rand value) to be reflected in the 2021 FY’s income statement are
___________

(1) R49 360 000.

(2) R43 190 000.
(3) R33 564 800.
(4) R40 722 000.
(5) none of the above options.

QUESTION 26
Dinaka’s total actual closing inventory (Rand value) to be reflected in the 2021 FY’s income statement
is ___________

(1) R6 795 600.

(2) R6 913 200.
(3) R6 965 000.
(4) R7 245 000.
(5) none of the above options.

QUESTION 27
Assuming total actual sales units of 64 000 and 256 000 for HeavyD and LightD, respectively, Dinaka’s
total actual fixed distribution costs to be reflected in the 2021 FY’s income statement are ___________

(1) R889 000.

(2) R500 500.
(3) R633 000.
(4) R553 000.
(5) none of the above options.

QUESTION 28

For question 28 only, assume that:

(i) The actual manufacturing units for the 2020 FY were 45 000 and 180 000 for HeavyD and LightD,
respectively;
(ii) The fixed manufacturing overheads allocation rate for the 2020 FY was determined at R42 per
machine mixing hour; and
(iii) All other applicable information remains as given in the scenario.

Dinaka’s actual statement of profit or loss (income statement) for the 2020 FY would have included the
following, amongst other items ___________

(1) R148 000 – FMO under-allocation.

(2) R148 000 – FMO over-allocation.
(3) R842 000 – FMO under-allocation.
(4) R842 000 – FMO over-allocation.
(5) none of the above options.

[TURN OVER]
 MAC3761/Assignment01/0/2021

Take into account the below five points in answering questions 29 and 30 only:

(i) The budget contributions for the 2021 FY are R25 per HeavyD unit and R30 per LightD unit;

(ii) The budgeted variable distribution costs for the 2021 FY were R5,50 per unit for both products;

(iii) Where applicable, the sales mix must be a whole number or whole numbers only;

(iv) Ignore the implications of opening and closing inventories; and

(v) Except for points (i), (ii), (iii), and (iv) above, all the other applicable information remains as given in
the scenario.

QUESTION 29

The total budgeted fixed costs for the 2021 FY are ___________

(1) R5 648 000.

(2) R6 635 000.
(3) R7 135 200.
(4) R7 276 000.
(5) none of the above options.

QUESTION 30

Assuming total budgeted fixed costs of R6 600 000 for the 2021 FY, the budgeted margin of safety units
for the 2021 FY for product HeavyD is ___________

(1) 19 739.
(2) 16 139.
(3) 12 482.
(4) 8 882.
(5) none of the above options.

QUESTION 31

In order to determine the financial impact of a decision, only ________ future cash flows should be taken
into consideration.

(1) direct
(2) incremental
(3) fixed
(4) important
(5) none of the above options.

Use the following information to answer question 32 ONLY:

Covitds Mudambura owns Health Care Equipments (Pty) Ltd (“HCE”), a company that manufactures
and sells ventilators to private health facilities across the country. The company’s year-end is 30 April.
HCE is currently assessing the relevant costs of the company’s three assets (plant, vehicle, and
machinery) regarding a contract proposal to supply 150 000 ventilators. These three assets have been
idle for the 4 months leading to 30 April 2021, and if HCE opts not to go ahead with the proposed
ventilators’ contract, all the three assets will be sold on 30 April 2021. If accepted, the proposed
ventilators’ contract will commence on 1 May 2021 and run until 30 April 2023. At the end of the proposed
ventilators’ contract, the vehicle and the machinery will be sold while the plant will be dismantled.
[TURN OVER]
 MAC3761/Assignment01/0/2021

The following information relating to HCE’s three assets is provided:

Details Transaction Plant Vehicle Machinery Total
Date Rmil* Rmil* Rmil* Rmil*
Purchase costs 01-May-2018 50 2 48 100
Carrying value 30-April-2021 20 0,5 19,2 39,7
Resale value 30-April-2021 17 0,4 19,5 36,9
Carrying value 30-April-2023 0 0 0 0
Resale value 30-April-2023 0 0 2,5 2,5
Dismantling costs 30-April-2023 0,3 n/a n/a 0,3
*Rmil denotes R million

QUESTION 32

The total net relevant costs of the three assets regarding accepting the proposed ventilators’ contract
are ___________

(1) R37,2 million.

(2) R34,7 million.
(3) R39,7 million.
(4) R36,9 million.
(5) none of the above options.

Use the following information to answer questions 33 to 40 (all inclusive):

Industrial Printars (Pty) Ltd (“Printars”) specialises in large scale printing of banners, flyers, invoice
templates and access-control security registers booklets for corporates and municipalities. The company
has three departments, namely: Printing, Marketing and Sales. Printars has in excess of 45 highly
specialised industrial printing machines. All the printing machines are in use and one printing shift is
approximately 14 hours per machine. Printars’ printing overheads are mixed costs and are driven by
printing hours. All the printing overheads are incurred in the Printing Department; however, some portion
of the fixed printing overheads (FPO) are subsequently allocated to the other two departments. Printars
prepares and presents its management reports on a quarterly basis.
By reference to Printars’ printing overheads, the coefficient of determination (r2) between the dependent
variable and the related independent variable is 72% (assume correct). On average, Printars’ total
printing hours in a month is 14 975 hours while the average total monthly printing overheads is
R8 726 300. The company uses the high-low method to separate the printing overheads. Mrs Typeck,
Printars’ management accountant, prepared the below Graph XY to illustrate some of the company’s
Year 3 (historical) observations of the total printing overheads.

[TURN OVER]
 MAC3761/Assignment01/0/2021

GRAPH XY: PRINTING OVERHEADS FOR YEAR 3, QUARTER 3 (Q3) AND QUARTER 4 (Q4)

Take note, in the above Graph XY, the Printing overheads are presented in R’000.

QUESTION 33
By reference to Printars’ printing overheads and the related coefficient of determination, the dependent
variable is ___________
(1) month.
(2) printing overheads.
(3) printing hours.
(4) printars.
(5) none of the above options.

QUESTION 34
By reference to Printars’ printing overheads, which one of the following statements is incorrect regarding
the 72% coefficient of determination?

(1) The related correlation coefficient (r) is 84,85% (rounded to two decimal places).
(2) 28% of the change in printing hours is attributable to the change in printing overheads.
(3) 28% of the change in printing overheads is attributable to the change in factors other than
printing hours.
(4) 72% of the change in printing overheads is accounted for by the change in printing hours.
(5) none of the above options.

QUESTION 35
Based on Graph XY, the regression equation (where applicable, final answers must be rounded to the
nearest Rand) for Printars’ printing overheads is ___________

(1) y = R396x + R4 500 000.

(2) y = R270x + R5 000 000.
(3) y = R250x + R4 500 000.
(4) y = R247x + R5 000 000.
(5) none of the above options.

[TURN OVER]
 MAC3761/Assignment01/0/2021

QUESTION 36
Assuming total fixed printing overheads of R4 500 500 for Year 3, Month 11, the variable printing
overheads per printing hour for Year 3, Month 11 (final answer rounded to two decimal places) are
__________

(1) R283,52.
(2) R270,00.
(3) R450,00.
(4) R585,57.
(5) none of the above options.

Additional information relating to questions 37, 38, 39 and 40:

Assume that the following five points are applicable:
(i) The budgeted variable printing overheads for Year 4 will be R220 per printing hour throughout the
year;
(ii) During the first quarter (Q1) of Year 4, the monthly total printing overheads budget is R8 889 000.
This was determined based on the total budgeted printing hours of 14 950 per month;
(iii) The budgeted fixed printing overheads (FPO) are allocated to the departments using activity-based
costing (ABC) system;
(iv) The budgeted FPO for Year 4 comprise of three items only (see point (v) below). In this regard,
50%, 35%, and 15% of the total monthly budgeted FPO relate to insurance costs, rent expense and
cleaning services costs, respectively; and
(v) The following information is applicable for the allocation of the fixed printing overheads in Year 4:
FPO and allocation basis Printing Marketing Sales
Department Department Department
Insurance costs is based on the insured value (IV) IV = R120m IV = R40m IV = R90m
2 2 2
Rent expense is based on floor space occupation (m ) 1 200m 550m 250m2
Cleaning services costs is based on the cleaning staff 15 staff 6 staff 9 staff

QUESTION 37
The budgeted total variable printing overheads for Month 03 of Year 4 are ___________
(1) R3 842 000.
(2) R3 692 650.
(3) R3 289 000.
(4) R3 422 250.
(5) none of the above options.
QUESTION 38
The total budgeted insurance costs allocated to the Marketing Department for Month 02 of Year 4
are ___________
(1) R448 000.
(2) R711 120.
(3) R400 000.
(4) R526 240.
(5) none of the above options.

[TURN OVER]
 MAC3761/Assignment01/0/2021

QUESTION 39
The total budgeted rent expenses allocated to the Printing Department for Month 01 of Year 4
are ___________
(1) R1 866 690.
(2) R1 176 000.
(3) R1 050 000.
(4) R1 151 130.
(5) none of the above options.
QUESTION 40
The total budgeted cleaning services costs allocated to the Sales Department for Month 03 of Year 4
are ___________
(1) R225 000.
(2) R400 005.
(3) R252 000.
(4) R148 005.
(5) none of the above options.

©
UNISA 2021
All rights reserved. No part of this document may be reproduced or transmitted in any form or
by any means without prior written permission of Unisa.

[TURN OVER]