10,000.00 3.30 33,000.

00
14,000.00 2.70 37,800.00

4,000.00 1.20 4,800.00

10,000.00 1.20 12,000.00

14,000.00 1.20 16,800.00

10,000.00 4.00 40,000.00

14,000.00 3.48 48,720.00

4,000.00 1.68 8,720.00

1.60 16,000.00

Total costs 80,000.00

Variable costs 3.00

Fixed costs 2.00

VC/U

Total Variable costs

Total costs

Sales 15,000.00 6.00

27,000.00 5.50

12,000.00 3.00

2.40

81,000.00

67,500.00

Level 90,000.00 10.00

111,000.00

21,000.00 3.00

Normal hours
 Overtime

180.00 1,920.00
180.00 60,000.00
31.25

Units Hours
44,000.00 Type 1 3.00
39,000.00 Type 2 5.00

6,000.00 Type 1 3.00

4,000.00 Type 2 5.00

15,000.00
24,000.00
9,000.00 8.00
18,000.00 8.00

Month
December
January
February
March
April
May
June
July
 21,000.00
21,000.00

42,000.00
48,720.00

6,720.00 23,520.00 25,200.00

24,000.00 24,000.00

460,000.00

276,000.00
184,000.00

3.45 3.28

393,300.00
577,300.00

90,000.00 112,500.00

148,500.00

36,000.00

36,000.00

54,000.00

54,000.00

900,000.00

963,000.00

63,000.00

600,000.00
 1,500,000.00
2,100,000.00

345,600.00
10,800,000.00
31.25

132,000.00 Manufacturing costs

195,000.00
327,000.00 250,000.00
909,375.00
18,000.00 1,159,375.00
20,000.00
38,000.00

365,000.00

19,400.00

380,000.00
470,000.00
72,000.00

120,000.00
260,000.00
 144,000.00
404,000.00

Sales (Units) Closing Inventory Opening Inventory

1,375.00
5,500.00 1,450.00 1,375.00
5,800.00 1,400.00 1,450.00
5,600.00 1,225.00 1,400.00
4,900.00 1,100.00 1,225.00
4,400.00 1,300.00 1,100.00
5,200.00 1,375.00 1,300.00
5,500.00 - 1,375.00
- -
Payment to Suppliers Purchases Wages

5,575.00 40,140.00 5,000.00

5,750.00 41,400.00 5,000.00
40,140.00 5,425.00 39,060.00 5,000.00
41,400.00 4,775.00 40,110.00 5,000.00
39,060.00 4,600.00 38,640.00 5,000.00
40,110.00 5,275.00 44,310.00 5,000.00
38,640.00 4,125.00 34,650.00 5,000.00
44,310.00 -
34,650.00
-
-
-
Bouns

750.00
750.00
Chapter 2 : Cost Classification

Basic questions

BQ1 Fixed v Variable

If sales volume increases by 20%, selling expenses

sales volume, and at the final sales volume?

Variable Volume increase by 20%, costs should increase by

Fixed Volume increase by 20%, costs should increase by

1/4 25.000%
5/23 21.739%

BQ2 High-Low Method: Change in costs/change in units = VC/Un

At a sales level of 10 000 units per month, the man

4000 units, the manufacturing overhead per unit fa

Units Cost/Unit
10,000.00 3.30
14,000.00 2.70
 4,000.00 1.20

BQ3 High-Low Method: Change in costs/change in units = VC/Un

At the sales level of 10 000 units per month, the ma

manufacturing costs increases by 5%. If the sales le
R3.48. What is the variable manufacturing overhea

Rate before increase

Units Cost/Unit
10,000.00 4.00
14,000.00 3.48

4,000.00 1.60

Rate after increase

Units Cost/Unit
10,000.00 4.00
14,000.00 3.48

4,000.00 1.68

BQ4 Fixed v Variable

The total manufacturing cost incurred during a yea
3:2 respectively, at a production level of 80 000 uni
available on all variable costs. What will the total m

Ratio
Variable 3.00
Fixed 2.00
Total 5.00

Variable
Fixed
Total

BQ5 High-Low Method: Change in costs/change in units = VC/Un

At the sales level of 15 000 units per month, the ma

the price of all manufacturing costs increases by 25
per unit falls to R5.50. Determine the total fixed ma

Fixed Overhead before increase

Units Cost/Unit
15,000.00 6.00
27,000.00 5.50
 12,000.00 2.40

Fixed Overhead after increase

Units Cost/Unit
15,000.00 6.00
27,000.00 5.50

12,000.00 3.00

BQ6 High-Low Method: Change in costs/change in units = VC/Un

The total manufacturing cost per unit was R10 at a

the total manufacturing costs will increase by 7%. W

Units Cost/Unit
90,000.00 10.00
111,000.00 8.68

21,000.00 3.00

BQ7 Production Capacity

Full capacity is 200 000 units. The direct labour cos

production level is 185 000 units. A large order for
order to create the additional capacity required to f
Full capacity is 200 000 units. The direct labour cos
production level is 185 000 units. A large order for
order to create the additional capacity required to f

Units Hours/Unit
Full Capacity 200,000.00 4.00
Current Level (185,000.00) 4.00
Unutilised capacity 15,000.00 4.00

Order 40,000.00 4.00

Unutilised capacity (15,000.00) 4.00
Overtime 25,000.00 4.00
Total Labour cost for the order

BQ8 Production Capacity

An organisation has 345 600 labour hours available t

R60 000 per annum each). The organisation manufac
hours to manufacture, while type 2 requires 5 hours o
per unit. The organisation already has orders for 44 0
type 1 and 4 000 type 2 units has been received. The
and an association with this customer will enhance th
in order to create any additional capacity required to
amount will total manufacturing costs increase?
in order to create any additional capacity required to
amount will total manufacturing costs increase?

Employees
Full Capacity 180.00

Product Units
Type 1 44,000.00
Type 2 39,000.00

Order Product Units

Type 1 6,000.00
Type 2 4,000.00

Total Hours required

Short fall to be paid overtime rate

Increase in manufacturing costs

BQ9 High-Low Method: Change in costs/change in units = VC/Un

 Units Step
15,000.00
24,000.00 18,000.00

9,000.00 8.00

Activity Levels 18,000.00 8.00

elling expenses increase by 15%. What proportion of sel
olume?

s should increase by 20%

s should increase by 0%

Proportion before change

Proportion after change

nge in units = VC/Unit

month, the manufacturing overhead per unit is R3.30 per

head per unit falls to R2.70. What is the variable manufac

Total
33,000.00
37,800.00
 4,800.00

nge in units = VC/Unit

month, the manufacturing overhead is R4.00 per unit. T

%. If the sales level increases by 4000 units, the manufac
turing overhead per unit?

Total Increase
40,000.00
46,400.00 1.05

6,400.00

Total Increase
42,000.00 1.05
48,720.00

6,720.00
ed during a year was R460 000, which comprises both va
el of 80 000 units. If a production level of 100 000 units i
will the total manufacturing costs be at a production lev

VC/U
276,000.00 3.45
184,000.00
460,000.00 80,000.00

393,300.00 3.28
184,000.00
577,300.00 120,000.00

nge in units = VC/Unit

month, the manufacturing overhead per unit of compan

increases by 25%. If the sales level increases by 12 000 u
e total fixed manufacturing overhead for company A.

Total Increase
90,000.00
118,800.00 1.25
 28,800.00

Total Increase
112,500.00 1.25
148,500.00

36,000.00

nge in units = VC/Unit

it was R10 at a production level of 90 000 units. If the pr

crease by 7%. What is the variable manufacturing cost p

Total Increase
900,000.00
963,000.00 1.07

63,000.00

irect labour cost is R10 per hour. 4 hours of labour time

large order for 40 000 units has been received. Staff will
ty required to fill the order. What will the labour cost be
irect labour cost is R10 per hour. 4 hours of labour time
large order for 40 000 units has been received. Staff will
ty required to fill the order. What will the labour cost be

Total Hours Rate

800,000.00
(740,000.00)
60,000.00 10.00

160,000.00
(60,000.00)
100,000.00 10.00

ours available to it each year (180 employees working 192

isation manufactures two kinds of units, type 1 and type 2.
quires 5 hours of labour time per unit. Both units incur oth
s orders for 44 000 and 39 000 type 1 and type 2 units resp
n received. The organisation is very excited, as the custome
r will enhance the organisation's image. As a result, staff wi
city required to fill the order, if necessary. If the organisati
s increase?
city required to fill the order, if necessary. If the organisati
s increase?

Hours/Unit Total Hours

1,920.00 345,600.00

Hours/Unit Total Hours

3.00 132,000.00
5.00 195,000.00
327,000.00

Hours/Unit Total Hours

3.00 18,000.00
5.00 20,000.00
38,000.00

365,000.00

Hours
19,400.00

nge in units = VC/Unit

Total Variable Costs
380,000.00 120,000.00
452,000.00

72,000.00

144,000.00
What proportion of selling expenses was fixed at the init

ad per unit is R3.30 per unit. If sales level increases by

is the variable manufacturing overhead per unit
head is R4.00 per unit. The next month the price of all
000 units, the manufacturing overhead per unit falls to
which comprises both variable and fixed costs in a ratio o
level of 100 000 units is reached, a discount of 5% is
s be at a production level of 120 000 units?

Before discount

Units

After discount

Units

head per unit of company A is R6.00/unit. The next mont

el increases by 12 000 units, the manufacturing overhead
ead for company A.

Variable Fixed Cost

36,000.00 54,000.00
 Variable Fixed Cost
45,000.00 67,500.00

of 90 000 units. If the production level increases to 11100

e manufacturing cost per unit?

4 hours of labour time is required per unit. The current

been received. Staff will work overtime (at time and half)
t will the labour cost be for this order?
 4 hours of labour time is required per unit. The current
been received. Staff will work overtime (at time and half)
t will the labour cost be for this order?

Overtime Total

600,000.00

1.50 1,500,000.00
2,100,000.00

employees working 1920 hours a year, who earn a salary

units, type 1 and type 2. A type 1 unit requires 3 labour
unit. Both units incur other variable expenses at a rate of R
e 1 and type 2 units respevtively. A large order for 6 000
y excited, as the customer has a high profile in the industry
mage. As a result, staff will work overtime (at time and a ha
cessary. If the organisation accepts this order, by what
cessary. If the organisation accepts this order, by what

Rate/year Total
60,000.00 10,800,000.00

VC/Unit Total
25.00 150,000.00
25.00 100,000.00
250,000.00

Labour cost
909,375.00

1,159,375.00
Fixed Costs Total Costs
260,000.00

260,000.00 404,000.00
es was fixed at the initial

s level increases by
head per unit
nth the price of all
head per unit falls to
fixed costs in a ratio of
a discount of 5% is
0 units?

0/unit. The next month

anufacturing overhead
vel increases to 111000,

per unit. The current

ime (at time and half) in
der?
 per unit. The current
ime (at time and half) in
der?

ear, who earn a salary of

it requires 3 labour
expenses at a rate of R25
large order for 6 000
profile in the industry
rtime (at time and a half )
his order, by what
his order, by what

Rate/Hour
31.25

Overtime rate
46.88