Other
MAC3761 - ASSIGNMENT 2
- Institution
- University Of South Africa (Unisa)
MAC3761 - ASSIGNMENT 2 - Detailed Assignment (Questions & Detailed Answers)
[Show more]
1 review
By: unathinombombo • 3 year ago
Content preview
MAC3761, QUESTIONS:
QUESTION 1:
a) Prepare the revised income statement (budgeted statement of profit or loss) for the Cover Division for the year ended 31 March
2022. Present separate columns for the two product types, as well as a total column. (8 Marks)
b) Explain why the revised budgeted income statement in (a) above will be more useful in terms of the discontinuation decision than
the original absorption costing budgeted income statement, assuming that the decision is made only from the Cover Division’s
perspective and based on quantitative factors only. (7 Marks)
c) Assuming that the variable manufacturing overheads per unit amounts to R11 for Instaheat Covers and R17 for Grillmaster Covers
and that covers are not produced in batches, calculate how many units of microwave oven covers the Cover Division should sell to
break even. (7 Marks)
d) Discuss two potential advantages that the use of a JIT system in its purchasing and manufacturing processes will have for the Cover
Division. (4 Marks)
e) Nelson Mthembu was heard saying, “Due to the potential dangers of radiation that can leak from microwave ovens, it is important
for Qhubeka to meet minimum required quality standards.”
(i) Describe total quality management and explain why it would be important from both a (ii) business and (iii) ethical perspective
that Qhubeka’s microwave ovens are of high quality. (3 Marks)
f) Determine which of the Magnetron Division and the Control Switches Division performed better for the year ended 31 March 2021
in terms of:
(i) Residual income (RI); and
(ii) Return on investment (ROI). (8 Marks)
g) Assuming that the Control Switches Division has a higher RI but a lower ROI than the Magnetron Division, recommend to Qhubeka
which one of these two performance measures should be used for fairer comparison of the two divisions and briefly motivate your
recommendation. (2 Marks)
h) (i) Calculate the total amount in terms of the current transfer pricing policy that the Control Switches Division had to pay for the 50
000 units transferred from the Magnetron Division.
(ii) Assuming that transfer prices are negotiated and that the maximum price the Control Switches Division would be willing to pay
for each of the 50 000 units transferred, is the current market price, comment on whether the amount calculated in (h)(i) would be
fair from the transferring division’s perspective only. (6 Marks)
1.
,QUESTION 2:
a) For the 2020 and 2021 financial years of Shopwise Holdings Limited, perform an analysis of the following items by calculating
relevant ratio/s and providing insight into each ratio calculated: (20 Marks)
(i) Revenue analysis (calculations 4 marks; comments 4 marks)
(ii) Asset utilisation/profitability (calculations 2 marks; comments 2 marks)
(iii) Corporate social investment (calculation 1 mark; comment 1 mark)
(iv) Employee development (calculation 1 mark; comment 1 mark)
(v) Overall cost management (calculation 2 marks; comments 2 marks)
b) Advise if Shopwise should undertake the new financial services mobile app project. [Show all relevant calculations (8 marks) to
support your advice (2 marks)] (10 Marks)
c) Use the Price/Earnings multiple method to advise the management of Shopwise whether the minimum price for the stake in Q-Ticket
is reasonable at 31 March 2021. (11 Marks)
The marks are allocated as follows:
(i) P/E method (calculations 5 marks; commentary 1 mark)
(ii) Reasonableness test (calculations 4 marks; commentary 1 mark)
d) If Shopwise decides to offer shares in the company in exchange for the stake in Q-Ticket, determine the number of shares that will be
issued and if relevant, also state the cash portion payable. [Ignore tax implications] (4 Marks)
e) Discuss the business risks that Shopwise will have to consider before it decides to introduce financial services as part of its product
offering and provide suggestions as to how the company can best proactively manage each risk. (10 Marks)
2.
, SOLUTION:
QUESTION 1:
a) Revised income statement (budgeted statement of profit or loss) for the Cover Division for the year ended 31 March 2022 based
on direct costing principles.
Instaheat Cover Grillmaster Cover Total
R R R
Sales (10,000.00 x 250), (12,000.00 x 237.5) 2,500,000.00 2,850,000.00 5,350,000.00
Less Variable Cost of sales (1,793,818.00) (2,256,182.00) (4,050,000.00)
Opening Inventory - - -
Direct Labour 950,000.00 1,140,000.00 2,090,000.00
Direct Materials 700,000.00 910,000.00 1,610,000.00
Variable Manufacturing overheads 143,818.00 206,182.00 350,000.00
Cost of goods available for sale 1,793,818.00 2,256,182.00 4,050,000.00
Less Closing inventory - - -
Contribution 706,182.00 593,818.00 1,300,000.00
Less Total Fixed Costs (300,000.00) (425,000.00) (1,100,000.00)
Specific Fixed Manufacturing overheads 300,000.00 425,000.00 725,000.00
General FMO allocated - - 375,000.00
Net Profit before tax/(loss) 406,182.00 168,818.00 200,000.00
Workings
1) Allocation of Variable Manufacturing overheads
Instaheat Cover:
Variable based on number of batches
[(10,000.00/50) / (10,000.00/50 + 12,000.00/50)] x 70,000.00 31,818.00
Variable based on labour hours [(8,000.00/20,000.00) x 280,000.00] 112,000.00
Total 143,818.00
Grillmaster Cover
Variable based on number of batches
[(12,000.00/50) / (10,000.00/50 + 12,000.00/50)] x 70,000.00 38,182.00
Variable based on labour hours [(12,000.00/20,000.00) x 280,000.00] 168,000.00
206,182.00
3.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller EducationSA. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R50,00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
52510 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 14 years now