MANAGEMENT ACCOUNTING III MODULE I MAIN EXAMINATION MEMORANDUM 2023

Question: 1 Advanced Standard Costing (30 Marks: 54 Minutes)

Material price
variance = (SP - AP) x AQ
=(R50½ - R51½) x 35 000 metres½ R35000½ adverse½

Material usage
variance = (SQ - AQ used) x SP
=[(10500½ x 3m) - 35
000m½)]xR50½ R175000½ adverse½

Labour rate variance = (SR - AR) x AH

= (R25 ½- R22.50½) x 41 000
hours½ R102500½ favourable½

Labour efficiency
variance = (SH - AH) x SR
= [(10 500 x 4 hours) ½ - 41 000
hours½)] x R25½ R25000½ favourable½

= (rate variance + efficiency

Total labour variance variance)
= R127 500F + R25 000F R127 500 favourable

Variable overhead
rate variance = (SR - AR) x AH
= (R10½ - R9.27½) x 41 000
hours½ R29930½ favourable½

Variable overhead
efficiency variance = (SH - AH) x SR
= [(10 500 x 4 hours) ½ - 41 000
hours½)] x R10.00½ R10000½ favourable½

Total variable = (rate variance + efficiency

overhead variance variance)
= R29 930F + R10 000F R39 930 favourable

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 MANAGEMENT ACCOUNTING III MODULE I MAIN EXAMINATION MEMORANDUM 2023

Fixed overhead
expenditure variance = BFO – AFO
= R200 000½ - R210 000½ R10000½ adverse½

Sales price variance = (AP - SP) x AV

= (R490 ½- R500½) x 10 500½ R105000½ adverse½

Sales volume
variance = (AV - BV) x SM
= (10 500½ - 10 000½) x R210½ R105000½ favourable½

= (price variance + volume

Total sales variance variance)
= R105 000A + R105 000F 0

Budgeted profit 1 900 000½

Sales volume variance 105 000½
Standard profit 2 005 000½
Sales price variance (105 000) ½
Material price variances (35 000) ½
Material usage variances (175 000) ½
Labour rate variance 102 500½
Labour efficiency variance 25 000½
Variable overhead rate variance 29 930½
Variable overhead efficiency variance 10 000½
Fixed overhead expenditure variance (10 000) ½
Actual profit 1 847 430½

Question: 2 Flexible Budgets (20 Marks: 36 Minutes)

Use the high-low method to divide production overhead into its fixed and variable
portion:

Differenc
Current Previous e
Units manufactured and
sold 12 000 9 500 2 500
Production overhead 175 500 140 500 35 000

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 MANAGEMENT ACCOUNTING III MODULE I MAIN EXAMINATION MEMORANDUM 2023

Divide the difference in rand value by the difference in units:

R 35 000
Production overhead variable cost= =R 14 , 00 
2 500 units

This means that the variable portion included in production overhead is R14,00 per unit.
To determine the value of the fixed portion, take any year’s total production overhead
cost and deduct the variable portion as follows:

¿ portion of production overhead=R 175 500−( R14.00 × 12000 )=R 7 500

We now know that production overhead consists of a fixed portion of R7 500 and a
variable portion of R14,00 for every unit.

Variable
Original Fixed Variable
cost
budget cost cost
per unit
(Budget - (Variable/
Units manufactured 12 000
Fixed) 12000 units)
R R R R
Direct material 126 000 - 126 000 10.50
Direct labour 180 000 - 180 000 15.00
Production overhead 175 500 7 500  168 000  14.00
Administrative expenses 25 000 25 000 - -
Selling and distribution
18 500 18 500 - -
expenses
Total cost 525 000 51 000 474 000 39.50

Fixed Flexible Actual Variances

budget budget results
Units 12 000 10 450  10 450
Direct material 126 000 109 725  114 500 4 775A ½
Direct labour 180 000 156 750  165 000 8 250A ½
Production overhead 175 500 153 800  185 600 31 800A ½
Administrative expenses 25 000 25 000  24 250 750F ½
Selling and distribution 800A ½
18 500 18 500  19 300
expenses
Total cost 525 000 463 775  508 650 44 875A ½

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 MANAGEMENT ACCOUNTING III MODULE I MAIN EXAMINATION MEMORANDUM 2023

Question: 3 Inventory Management (25 Marks: 45 Minutes)

1.

EOQ =
√ 2 ×2 000 × R 800
R 200
 = 4 000

2. Discount (2 000 000 X R100 X 0.01) = R2 000 000

Order costs [(2 000 000/4 000) X800] – [(2 000 000/10 000)800= R240 000 
Total Savings R2 240 000
Holding cost [(10 000 – 4 000)/2] X R200 = (R600 000)
Net savings R1 640 000
Total net saving is R1 640 000 and this minimises total costs . Therefore, the quantity
discount offer should be taken. 

3.

Averag Safety Re- Stock Weekly Pro Expecte Weekly Total

e Stock order Out Stock-out b. d Holding
Usage level Cost @ Weekly Cost Cost
S/O
R100 Cost (SS x
R200/5
0)

4 000 2 000 6 000 0 0 0 R8 000 R8 000



4 000 1 000 5 000 1 000 R100 000 0.10 R10 000 R4 000 R14 000
 

4 000 0 4 000 2 000 R200 000 0.10 R20 000 R40 000
 
1 000 R100 000 0.20
R20 000


R40 000

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 MANAGEMENT ACCOUNTING III MODULE I MAIN EXAMINATION MEMORANDUM 2023

The company should keep an optimum safety stock of 2 000 units. 

4. Basic Aim of JIT (Maximum of 6 Marks)

 “Just in time” means that raw materials are received just in time to be used in
production,
intermediate manufactured parts are completed just in time to be assembled into
products,
and finished products are completed just in time to be delivered to customers.
 Under ideal conditions, under a JIT system, only enough materials would be
purchased
each day to meet that day’s needs, and all goods completed that day would be
delivered
to customers.
 The only inventory that would be carried under ideal conditions would be work in
process
of intermediate products with a processing lead time of greater than one day.
 Although the ideal of zero inventories is seldom, if ever reached, JIT has helped to
substantially reduce inventories in many businesses.

Key Elements in a JIT System

1. Limited Number of Suppliers

2. Improving the Plant Layout

3. Reduced Setup Times

4. Total Quality Control

5. Flexible Work Force

Question: 4 Budgets and Budgetary Control (25 Marks: 45 Minutes)

Working:
Budgeted sales:

Product Units Price Total

F1 34 000 R50 R1 700 000

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 MANAGEMENT ACCOUNTING III MODULE I MAIN EXAMINATION MEMORANDUM 2023

F2 58 000 R30 R1 740 000

R3 440 000
Production budget:

F1 F2

Sales 34 000 58 000

Add: Closing inventory 1 000 2 000

Production 35 000 60 000

i) Component usage and purchases budget

C3 C4

Production – F1 35 000 35 000

Material requirement 8 4

Total units 280 000 140 000

x Purchase price R1.25 R1.8

Total R350 000 R252 000 R602 000

C3 C4

Production – F2 60 000 60 000

Material requirement 4 3

Total units 240 000 180 000

x Purchase price R1.25 R1.8

Total R300 000 R324 000 R624 000

Total usage/purchases R1 226 000

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 MANAGEMENT ACCOUNTING III MODULE I MAIN EXAMINATION MEMORANDUM 2023

ii) Direct labour

Assembly Finishing

Production – F1 35 000 35 000

Hours per unit 0.5 0.2

Total hours 17 500 7 000

x Hourly rate R5 R6

Total R87 500 R42 000 R129 500

Assembly Finishing

Production – F2 60 000 60 000

Hours per unit 0.25 0.17

Total hours 15 000 10 000

x Hourly rate R5 R6

Total R75 000 R60 000 R135 000

Total budgeted labour hours R264 500 

iii) Manufacturing overhead recovery rates

Assembly Finishing

Manufacturing overheads R617 500 R204 000

Total hours 32 500 17 000

Overhead rate per hour R19 R12

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 MANAGEMENT ACCOUNTING III MODULE I MAIN EXAMINATION MEMORANDUM 2023

iv) Selling overhead recovery rate

= (Budgeted overhead/Sales) x 100
= (344 000/3 440 000) x 100
= 10%

b) Calculation of cost and profit per unit

F1 F2

R R

Material

- C3 (8 x 1.25) 10.00 (4 x 1.25) 5.00

- C4 (4 x 1.80) 7.20 (3 x 1.80) 5.40

Labour

- Assembly 30/60 x 5 2.50 15/60 x 5 1.25

- Finishing 12/60 x 6 1.20 10/60 x 6 1.00

Manufacturing overhead

- Assembly 30/60 x 19 9.50 15/60 x 19 4.75

- Finishing 12/60 x 12 2.40 10/60 x12 2.00

Manufacturing cost 32.80 19.40

Add: Selling overhead 50 x 10% 5.00 30 x 10% 3.00

Total costs 37.80 22.40

Selling price 50 30

Profit 12.20 7.60

16/2 = 8 marks

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 MANAGEMENT ACCOUNTING III MODULE I MAIN EXAMINATION MEMORANDUM 2023

c)Budgeted statement of comprehensive statement for Month 9

Sales 3 440 000

Less: Cost of sales (2 240 400) 

Opening inventory -

Production (35 000 x 32.80) + (60 000 x 19.40) 2 312 000

Less: closing inventory (1000 x 32.80) + (2000 x 19.40) (71 600) 

Gross profit 1 199 600

Less: Selling overheads (344 000) 

Profit 855 600

6/2 = 3 Marks