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MAC2601 Oct/Nov 2020 Exam

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  • January 12, 2022
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Principles of Management Accounting
MAC2601
Exam Oct/Nov 2020
100 Marks
Duration 2 Hours

,QUESTION 1 – 17 Marks (20 Minutes)

Fitness Fanatics (Pty) Ltd (“Fitness Fanatics”) was established in 2011 by Ms. Thembi
Mutsamayi and is based in Krugersdorp. The company is a processor and distributor of a
popular type of protein energy bar called Pumpkin Seed. The company has a 30 June year-
end.

Budgeted data for the year ended 30 June 2020 are as follows:

Pumpkin Seed
Sales units 1 500 000
Selling price per unit R38,50
Direct material costs per unit R12,00

Some of the company costs in total (Rand) for the 2020 financial year were as follows:

Budgeted Actual
R R
Fixed manufacturing overheads 22 644 000 24 000 000
Direct labour 12 520 800 ?
Fixed administrative salaries 777 000 777 000
Selling and distribution costs 2 140 000 2 000 000

The Senior Management Accountant provided the following information with regard to the
actual figures for the year ended 30 June 2020:

Pumpkin Seed
Selling price per unit R39,00
Direct material costs per unit R9,70
Direct labour rate per hour R24,00




QUESTION 1 (continued)

, 2. No inventory of direct materials or work-in-progress is held. The company used the first-
in-first-out (FIFO) method of inventory valuation.

3. All completed protein energy bars are packaged and taken into inventory.

4. Assume that the opening and closing budgeted inventories in units are equivalent to the
respective opening and closing actual inventories in units (per the above quantity schedule).

5. The actual inventory costs on 1 July 2019 also includes absorbed fixed manufacturing
overheads.

6. Fixed manufacturing overheads (FMO) are absorbed based on normal capacity of 503 200
direct labour hours per year. FMO are allocated to production based on direct labour hours
worked.

7. The actual direct labour hours for the 2020 financial year were 483 000.




Answer:

𝑅22 644 000
a) Budgeted overhead rate = hrs = R45 per hour
503 200
Applied overheads: 𝑅45 × 483 000 hrs = 𝑅21 735 000
Actual overheads (given) 𝑅24 000 000
Under applied overheads 𝑅 2 265 000

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