FACULTY/COLLEGE College of Business and Economics

SCHOOL School of Accounting

DEPARTMENT Commercial Accounting
CAMPUS(ES) SWC
MODULE NAME Cost & Financial Management 3A
MODULE CODE CFM33A3
SEMESTER First
ASSESSMENT OPPORTUNITY Assessment Opportunity 5

ASSESSMENT 8 June 2022 SESSION 12:30 – 14:00

DATE
ASSESSOR(S) M Janse van Rensburg, L Joubert, K Motaung
MODERATOR(S) Ms C Koto and Mr R Kole
DURATION 1½ hours (90 TOTAL MARKS 50
min)

NUMBER OF PAGES OF QUESTION PAPER (Including cover 6

page)

INFORMATION / INSTRUCTIONS:
________________________________________________________________________
 This is a closed-book assessment.
 You may use silent, non-programmable calculators.
 Round all calculations to two decimals unless stipulated otherwise.
 In the centre, indicate your class list number (next to your name on the attendance
register) at the top of your answer sheet.
 Answer each question in a separate book:
Question 1 – BLUE, Question 2 – YELLOW, Question 3 – RED.
 Read the questions carefully and answer only what is required.
 Number your answers clearly and correctly as per the question paper.
 Write neatly and legibly in the answer book, starting on the first page.
_________________________________________________________________________

QUESTION TOPIC MARKS MINUTES

1 Standard costing 10 18
 2 Standard costing 16 29

3 CVP 24 43

Question 1 (10)

Mr Nkosi manufactures braai stands and sells them at local outlets. He uses a standard direct
costing system with the following standard cost for a braai stand:

Steel: 2.5 kilogram @ R120 per kilogram

Direct labour: 156 minutes @ R50 per hour

Variable manufacturing overheads: R30 per direct labour hour

The following information was obtained from Mr Nkosi’s records for July:

Debit Credit
Direct labour efficiency variance R1 100
Direct labour rate variance R1 188
Direct material price variance R2 695
Direct material quantity variance R1 320

The actual production and sales for July were 220 braai stands.
REQUIRED:

1.1 Calculate the standard quantity for direct material. (1)

1.2 Calculate the actual quantity for direct material. (2)

1.3 Calculate the standard labour hours for direct labour. (1)

1.4 Calculate the actual direct material cost per kilogram. (2)

1.5 Calculate the actual labour hours for direct labour. (2)

1.6 Calculate the actual labour rate per hour for direct labour. (2)
 Question 2 (16)

Open Ltd (“Open”) manufactures wooden doors and sells them to individual customers and
retailers. Open uses an absorption costing system.

Open uses second-grade wood to produce the doors. It was anticipated that each kilogram (kg)
of wood would be purchased at R9.50 per kg and that each door would require 11 kg of wood to
be produced. For the year-end, 12.5 kg of wood was used for each door. Wood was purchased
at R11.50 per kg.

Each door requires 1 hour and 24 minutes of direct labour to be manufactured. Actual direct
labour hours worked for the year ended were 26 980 at R574 674. The budgeted production
schedule indicated that each labour hour would be compensated at R19 per hour.

Variable manufacturing overheads are absorbed at 60% of the direct labour rate per hour.

Annual budgeted fixed manufacturing overheads were forecasted at an allocation rate of R18.50
per door at a normal capacity of 22 000 doors. The actual fixed cost was R400 000 for the
period concerned.

For the year ended, it was budgeted that 20 850 doors would be produced and sold at R225 per
door. However, actual records revealed 138 more doors were produced and sold than what was
budgeted. This amounted to a total sales revenue of R4 407 480. It is company policy to use the
standard margin to calculate the sales volume variance.

REQUIRED:

Note: Indicate the formula of the variances in each case to mark the interpretation of the
variance.

2.1 Calculate the sales price variance. (2½)

2.2 Calculate the sales volume variance. (5)

2.3 Calculate the variable manufacturing overhead efficiency variance. (3)

2.4 Calculate the fixed manufacturing overhead expenditure variance. (1½)

2.5 Calculate the fixed manufacturing overhead volume variance. (2)

2.6 In which two variances can the fixed manufacturing overhead volume
variance be split? (2)
 Question 3 (24)

Central Batteries Pty Ltd manufactures and sells two types of car batteries, EFB and lead-acid
batteries. EFB batteries are characterized by their high performance and reliable advanced
technology. The lead-acid battery is an old model that must be checked regularly to ensure that
the acid level is still intact. The company provided you with the following budgeted information
for July 2022:

EFB Lead-acid
Direct material cost per unit R1 300 R780
Direct labour cost per unit R735 R462
Allocated fixed manufacturing overheads (July) R90 000 ?
Variable manufacturing cost per machine hour R350 R350
Total sales value R648 000 R630 000
Total machine hours 288 390
Total labour hours 630 630
Sales demand (in units) 180 300
Machine hours per unit 1.6 1.3
Labour hours per unit 3.5 2.1

Additional information:

 Sales commission paid to sales personnel is 3% of revenue for all battery types.
 Fixed manufacturing overheads allocated to lead-acid are budgeted to be 10% less than
EFB.
 Annual fixed sales and administration cost is expected to amount to R144 000.
 Fixed costs are expected to be incurred evenly throughout the year.
 The tax rate is expected to be 28%.
REQUIRED:

3.1 Calculate the monthly break-even of Central Batteries Pty Ltd.

Show the break-even units and value for both EFB and lead-acid
batteries. Use the budgeted sales mix provided. (16)

3.2 How many batteries must Central Batteries Pty Ltd sell to make a net
profit after tax of R97 000 per month? Assume that the current budgeted
sales mix applies. (6)

3.3 State whether the break-even units will increase or decrease if the
total fixed cost increases by R10 000. (1)

3.4 State whether the break-even units will increase or decrease if the
selling price increases by 15% for both EFB and lead-acid
batteries. (1)

[Paper total = 50 marks]