Reference no: EM131426514

QUESTION 1

Namib Grapes CC is registered is a company that buys Grapes from Aussinkher farm, this farm is situated in the south of Namibia. Namib Grapes and Aussinkher Farm agreed on a normal delivery time of two weeks and in difficult circumstances a maximum delivery time of four weeks is allowed. This agreement was reached after taking into account that Grapes can only be transported across by a mini truck that does not exceed the speed of 60 km per hour. After careful analysis of the operations of Namib Grapes, the following information became available:

Normal usage	5000 units per week
Purchase price per unit	$20,00
Average storage cost per unit per annum	$  3,50
Cost of placing an order	$75,00
Prime interest rate	10%
Production weeks per annum	48

The purchase of grapes is financed using an overdraft facility.

REQUIRED

1. Calculate the re-order level.
2. Calculate the safety stock.
3. Calculate the economic order quantity.
4. Calculate the average stock level.
5. Calculate the numbers of orders per year
6. Calculate the ordering cost per year

QUESTION 2

Kavango Investment CC provided you with the following information for the week ending 31 January 2016:

Name	Position	Normal Rate Per Hour	Hours Worked During the Week
Muremi A.	Receptionist	N$ 72.50	59
Ruben N.	Quantity Surveyor	N$ 95.00	57.5
Tabby T.	Engineer	N$ 115.00	50.5

Important Information;
• The Normal working hours are 45 hours per week.
• Overtime is remunerated at time and a half of normal rate.
• Employees get birthday bonuses on their month of birth. The bonus is 35% of the basic wage.
• The following deductions must be considered:
o Income Tax (PAYE) is 15%
o Social Security Contribution is 2% of the basic wage.
o Pension fund 5% employee; 8,70% employer, all based on basic salary
o Medical Aid N$35 per person; 2% of the basic pay by employer
• The company only has one Quantity Surveyor who was born on the 27th January 1984.

REQUIRED

1. Prepare a Payroll with all the detailed information for the week ending 31 January 2016.

2. Compile the Journal Entries of the payroll accounts for the week ending 31 January 2016.

QUESTION 3

NSP Limited produces tents for entertainment and for the outdoors. Production takes place in three departments, namely Cutting, Sewing and Finishing. Shown below is an extract from the budget for the manufacture of 8 800 tents for the year ended 31 May 2016:

	Manufacturing cost centre			Service cost centre
	Cutting	Sewing	Finishing	Personnel	Inspection
Budgeted overheads	N$411 525	N$72 850	N$82 900	N$118 500	N$92 200
Allocations of overheads
-     Personnel	18%	38%	29%	-	15%
-     Inspection	45%	13%	32%	10%	-

Required:

1 Calculate the allocation of overheads to the production cost centres using the repeated distribution method. (Start with the Personnel cost centre).

2 Confirm your answer in 4.1 by using the method of simultaneous equations.

QUESTION 4

Mr. James Chapman has recently qualified as an auditor, he and his class mate are thinking of opening up a small firm in their home town of Rehoboth. After a review of active firms in other small towns and interviews on how jobs use those firm's resources, they felt they had enough information to go ahead with the start-up. Chapman & Associates would operate using two direct cost categories (partner labour and audit manager labour) there would also be two indirect cost categories, namely clerical labour and general administration support. These would yield more accurate job costs. Budgeted information for operations in 2016 is as follows:

	Partner labour	Audit Manager labour
Number of employees	2	10
Hours of billable time per employee	600	600
Total compensation (per employee) (N$)	84 000	30 000

Budgeted information for the two indirect cost categories is as follows:

	Clerical labour	General admin support
Total costs (N$)	810 000	180 000
Cost allocation base	Partner labour	Audit Manager labour

Required:

Compute the 2016 budgeted rates for
(a) Partners
(b) Audit Managers

Compute the 2016 budgeted indirect cost rates for

(a) clerical hours
(b) general admin support

Calculate the budgeted costs for Chapman & Associates given the following:

	Purco Ltd	Max Ltd
Partners	24	16
Audit Manager	36	64

Required:

Calculate the cost of the two jobs for

(a) Purco Ltd
(b) Max Ltd

ASSIGNMENT 2

QUESTION 1

Define or briefly explain the following terms used in Management Accounting:
1.1.1 Flexible budget
1.1.2 Wastage
1.1.3 Machine hour rate
1.1.4 Marginal cost
1.1.5 Activity based costing

What would be the effect of using last in first out (LIFO) method of valuation stock rather than first in first out (FIFO) method in a period of rising prices?

Minox uses the economic order quantity formula (EOQ) to establish its optimal reorder quantity for its single raw material. The following data relates to the stock costs:

Purchase price:                                   N$15 per item

Ordering costs:                                   N$55 per order

Storage costs:                                     10%  of  purchase  price  plus  N$0.20  per unit per annum

Annual demand:                                  4 000 units

What is the EOQ?

A Domestic appliance retailer with multiple outlets stocks a popular toaster known as the Autocrisp 2000, for which the following information is available:

Average sales                      75 per day

Maximum sales                     95 per day

Minimum sales                      50 per day

Lead time                             12 - 18 days

Re-order quantity                   1 750

Based on the data above, answer the following questions:

At what level of stock would a replenishment order (Max usage x Max lead time) be issued?

What is the maximum level (Re-order level + Re-order qty - Min usage during Min lead time) of stock possible?

The following cost and inventory data are taken from the accounting records of Home Doctor CC for the year ended 28 February 2007:

	N$
Costs incurred:
Advertising	100,000
Direct labour costs	90,000
Purchases of raw materials	132,000
Rent - Factory building	80,000
Indirect labour	56,300
Sales commissions	35,000
Utilities - factory	9,000
Maintenance - factory equipment	24,000
Supplies - factory	700
Depreciation - office equipment	8,000
Depreciation - factory equipment	40,000

Required:

Prepare a schedule of cost of goods manufactured.

QUESTION 2

There are two production cost centres (P1 and P2) and two service cost centres (Materials Store and Canteen) in a factory. Estimated overhead costs for the factory for a period, requiring apportionment to cost centres, are:

	N$
Buildings depreciation and insurance	42 000
Management salaries	27 000
Electricity to operate machinery	12 600
Other utilities	9 400

In addition, the following overheads have been allocated to cost centres:

Cost Centres
P1	P2	Materials Store	Canteen

N$107 000

N$89 000

N$68 000

N$84 000

Further information:

	Cost Centres				Total
	P1	P2	Material store	Canteen
Floor Area (m²)	4 560	5 640	720	1 080	12 000
No of employees	18	24	6	6	54
% other utilities	35%	45%	10%	10%	100%
Machine hours	6 200	5 800			12 000
Share of Materials Store	40%	60%			100%

Required:

Prepare a schedule showing the primary allocation based on the above information.

Show also the secondary allocation

QUESTION 3

Colours Limited, a commercial painting contractor, uses a normal costing system to cost each job. Its job costing system has two direct categories (direct material and direct labour) and one indirect cost pool called overhead costs. To each job, Colours Limited allocats overhead at a budgeted rate of 80% of direct labour costs. Colours Limited provides the following additional information for February 2007:

a) As of 1 February 2007, Job A21 was the only job in process, having incurred direct material costs of N$30 000 and direct labour costs of N$50 000.

b) Jobs A 22, A 23, A 24 were started during February.

c) Direct materials used during February were N$150 000.

d) Direct labour costs for February were N$120 000.

e) Actual overhead costs for February were N$102 000.

f) On 28 February 2007, only Job A24 was still in process, having incurred direct material costs of N$20 000 and direct labour costs of N$40 000.

Colours Limited maintains a Jobs-in-Process control account in its general ledger. As each job is completed, its cost is transferred to the Cost of Jobs Billed account. Each month, Colours closes any under- or over- allocated overhead to Cost of Jobs Billed.

Required:

Give two examples of a direct cost and one example of an overhead cost for a job undertaken by Colours Limited.

Calculate the overhead allocated to Job A21 as of 1 February 2007.

Calculate the overhead allocated to Job A24 as of 28 February 2007.

Calculate the under- or over-allocated overhead for February 2007.

Calculate the Cost of Jobs Billed for February 2007.

Muronga Ltd supplied the following details regarding a contract that was still in progress at the end of the accounting period ended 29 February 2008:

Contract price                                                             R100 000

Cost to date                                                                 R  60 000

Estimated costs to completion                                    R  12 000

Sales value of work certified                                      R  75 000

Cost of certified work                                                 R  50 000

Retention amount       R         7 500

Calculate the amount of profit on this contract that may be transferred to the profit and loss account for the past accounting period, using each of the following methods:

The work certified method

The percentage of completion method

QUESTION 4

Katu Ltd manufactures a single product in one process and uses a process costing system. The following information is available for May 2007:

	N$	Units
Work in process - 1 May 2007	-	-
Units placed into process during May		47 500
Units completed		35 000
Costs for the month: Material	356 250
: Conversion costs	276 000
Work in process - 31 May 2007		2 500
Percentage complete:
Material                - 100%
Conversion costs  - 40%

Additional information:

a). Raw material is added at the beginning of the process. Conversion costs are incurred evenly throughout the process.
b). Normal wastage is estimated at 10% of input that reach the point of wastage. c). Losses occur at the end of the process.
d). Inventory is valued according to the weighted average method.

Required:

Prepare the following statements for May 2007:

Production statement

Production cost statement

QUESTION 5

Ramatex Manufacturers produces three similar products using the same machines and production processes. For the year ended 30 June 2007, production volumes are estimated as follows:

Annual production volumes (units)	Product name
80 000	Postikel (P)
25 000	Rostikel (R)
32 000	Costikel (C)

Total annual fixed production overheads are projected at N$3 475 000. For the purposes of performing and overhead allocation using activity-based costing principles, the following cost pools together with percentages, are presented to you:

Overhead activity (cost pool)	Allocated overheads (of the total)
General manufacturing	20%
Quality control	30%
Material handling	15%
Stores	35%

Pertinent cost driver and cost driver usage figures are tabled below:

		Cost driver usage
Cost Driver	Overhead facility	P	R	C
Direct labour hours	General manufacturing	20 000	20 000	10 000

Number of quality inspections	Quality control	180	220	100
Number of movements	Material Handling	226	310	214
Number of stores requisitions	Stores	1 920	1 865	1 215

Required:

Calculate the overhead absorption rate for each product based on:

traditional costing methods (labour hour basis)

activity-based costing principles