You are the management accountant of Freeze It (Pty) Ltd, a manufacturer of fridges for restaurants and supermarkets

Subject:AccountingPrice: Bought3

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You are the management accountant of Freeze It (Pty) Ltd, a manufacturer of fridges for restaurants and supermarkets. In an attempt to improve its share of the competitive refrigeration market, the company has recently completed a major investment in order to automate several aspects of its manufacturing and information technology departments. Freeze It has three departments involved in mainstream manufacturing (fabrication, assembly and painting) and two support departments (training and procurement). The company uses an absorption costing system for internal and external reporting purposes. You have prepared the following budgeted information for 2021: R 240 000 Electricity Depreciation of Machines Insurance of Buildings Maintenance of Machines TOTAL 1 200 000 90 000 850 000 2 380 000 Additional Information Fabrication Assembl Painting Training Procurement TOTAL Direct Labour Hot 4 000 5 000 4 500 500 1 000 15 000 Maintenance Hou 2 000 4 500 3 400 50 50 10 000 Value of Direct Materials Consun R10m R1,1m R2m RO,2m RO.2m R13.5m 3 600 2 800 180 420 12 000 Megawatt Hours 5 000 Book Value of R7,5m Machines R3,5m R7m RO,5m R1,5m R20m 1 000 1 800 250 250 4 000 Floor Area 700 Machine Hours 7 000 6 000 5 000 0 500 18 500 The in-house training department is responsible for improving skills and training courses are arranged so that the training budget is spent equally between the three production departments A customer has approached the company to quote on the manufacture of the T42, a new specialised solar panel fridge. The prime costs of the T42 is R15 000 and the product will spend ten, twelve and seven hours respectively in the fabrication, assembly and painting departments. As the new T42 is a new product, there is limited demand for the product. In order to undertake a comparison between ABC and the current cost method, you have obtained the following information relating to the production of the T42: ACTIVITY BASED CI TOTAL COST FORT NUMBER OF NUMBER OF EACH ACTIVITY REQUIREI POOL YEAR ACTIVITIES FOR MODEL T42 150 1 R 480 000 R 750 000 R 240 000 650 Product Design Fabrication Material Handling Painting Assembly 3 500 1 R 500 000 650 3 R 410 000 650 ??? TOTAL R2 380 000 2. Calculate the overhead recovery rate per department based on the traditional method (using machine hours).