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MAC3702 ASSIGNMENT 1 0F SEMESTER 2 OF2023
QUESTION 1
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two types of solar
geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar geysers. Letsatsi makes use of
an absorption costing system and all types of inventory are valued using the first-in-first-out
method (FIFO). The following information is available for the financial year ended 30 June 2023:
1. There was no actual and budgeted opening inventory of any type for the 2023 financialyear.
2. No actual or budgeted normal material losses occurred in the production process.
3. Letsatsi’s fixed manufacturing overheads (FMO) are allocated based on the budgeted direct
labour clock hours. The total budgeted FMO was R655 000 per month and the totalactual FMO
for the year was R9 200 000.
4. The budgeted other fixed administrative costs for the division were R2 358 000 per
annum and the actual other fixed administrative costs were R2 400 000.
The budgeted fixed manufacturing overheads allocation rate per direct labour clock hour for the 2023financial year is:
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Fixed manufacturing overheads allocation rate per direct labour clock hour
𝑇𝑜𝑡𝑎𝑙 𝑏𝑢𝑑g𝑒𝑡𝑒𝑑 fi𝑥𝑒𝑑 𝑚𝑎𝑛𝑢f𝑎𝑐𝑡𝑢𝑟i𝑛g 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑𝑠
=
𝑇𝑜𝑡𝑎𝑙 𝐵𝑢𝑑g𝑒𝑡𝑒𝑑 𝑑i𝑟𝑒𝑐𝑡 𝑙𝑎𝑏𝑜𝑢𝑟 𝑐𝑙𝑜𝑐𝑘 ℎ𝑜𝑢𝑟𝑠
655 000 * 12
=
131 000
= 𝑅60 𝑝𝑒𝑟 𝑑i𝑟𝑒𝑐𝑡 𝑙𝑎𝑏𝑜𝑢𝑟 𝑐𝑙𝑜𝑐𝑘 ℎ𝑜𝑢𝑟
QUESTION 2
Letsatsi (Pty) Ltd is a manufacturer of solar geysers. The company manufactures two types of
solar geysers, Low-pressure (“LowP”) and High-pressure (“HighP”) solar geysers. Letsatsi
makes use of an absorption costing system and all types of inventory are valued using the
first-in-first-out method (FIFO). The following information is available for the financial year
ended 30 June 2023:
1. There was no actual and budgeted opening inventory of any type for the 2023
financial year.
2. No actual or budgeted normal material losses occurred in the production process.
3. Letsatsi’s fixed manufacturing overheads (FMO) are allocated based on the budgeted
direct labour clock hours. The total budgeted FMO was R655 000 per month and the
total actual FMO for the year was R9 200 000.
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