question archive QUESTION 1 (15 MARKS, 27 MINUTES) Namib Mills has a production capacity of 200 000 bags of maize flour per year, normal capacity usage is reckoned as 90% Standard variable production costs are N$11 per bag

QUESTION 1 (15 MARKS, 27 MINUTES) Namib Mills has a production capacity of 200 000 bags of maize flour per year, normal capacity usage is reckoned as 90% Standard variable production costs are N$11 per bag

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QUESTION 1 (15 MARKS, 27 MINUTES) Namib Mills has a production capacity of 200 000 bags of maize flour per year, normal capacity usage is reckoned as 90% Standard variable production costs are N$11 per bag. The fixed cost is N$360 000 per year. Variable selling costs are NS3 per bag, and fixed selling costs are N$270 000 per year the selling price per bag is N$20. In the year just ended on the 30 August 2021, production was 160 000 bags. Accordingly, sales Call were 150 000 bags. The closing inventory on the 30 August 2021 was 20 000 bags. The actual 1- variable production costs for the year were N$ 35 000 higher than the standard. REQUIRED: MARKS 1.1 Calculate the profit for the year using absorption costing method to 6.5 1.2 Calculate the profit for the year using marginal costing method 5.5 1.3 Use your answers in 1.1 and 1.2 and reconciliation profits between the two 3 statements TOTAL MARKS FOR QUESTION 1 15 QUESTION 2 (20 MARKS, 36 MINUTES House & Home ("HH") manufactures a single model of a commercial prefabricated wooden cabinet. The basic cabinet components are cut out of wood in the cutting department and then transferred to the assembly department. Materials are added at the beginning of the process in both departments. Conversion costs are incurred evenly throughout the departments. Normal wastage incurred in the cutting department amounts to 4% of the units that reach the wastage point, and arise at the end of the process. The following information applies to the assembly department for September 2021: Opening inventory of work in progress (20% completed) So I Units introduced Units transferred to assembly department Closing inventory of work in progress (90% completed) Units 70 000 150 000 180 000 20 000 Opening Material Conversion Cost (NS) 325 000 128 000 Cost incurred in current period: Material Conversion 560 000 1 800 000 Page 2 of 7 MARKS 17 1.5 REQUIRED: 2.1. Prepare the process cost report for the cuiting department using the FIFO method. (Show all your workings, and where possible, round off your final answers to two decimal places) 2.2. in what way is process costing differ from a job costing system? 2.3. Clearly explain whether you would agree with the following statements: "Normal loss is controllable; hence it is shown as a separate line item in the company's financial statements. On the other hand, abnormal loss is uncontrollable, thus it is allocated to other accounts. TOTAL MARKS 1.5 20 QUESTION 3 (15 MARKS. 27 MINUTES) Jatropha Namibian Products ("NP") is a company that processes Jatropha plant seeds into bio diesel bio kerosene cosmetics and pesticides The JNP process uses jatropha seed that are bought from farmers in the SADC region. Because of the diversity of suppliers, the seeds delivered are not of the same quality. However production of biodiesel and bio kerosene requires high quality Jatropha seeds. This causes JNP to first do a grading of all the seeds procured. The grading process results in a yield of 90% and poor quality seeds at 5%. The rest are impurities that are considered normal losses. The grading process costs N$7 000 per month and N$0.10 per kilo of jatropha seeds graded. The poor quality seeds are processed further at a cost of N$2 per kilo into cosmetic paste that is sold for N$3 per kilo. ra After the grading, the high quality seeds are then ground to prepare them for extraction of bio diesel and blo kerosene. A liquefying chemical is applied to the ground seeds and the cost of this chemical Is N$20 per litre Two litres of the chemical are required for every 1 000 kilos of ground seeded cooking oil. Since this chemical is a dissolving chemical, it does not add to the weight of the ground seeds. Other costs incurred in the processing department is fixed manufacturing overheads of N$10 000 per month The average output from the processing department is 40% bio diesel and 60% blo kerosene. The bio diesel is sold as is to clients at N55 per litre while the (blo kerosene must be processed further to make it super refined for use in jet engines. The costs relating to the further processing of bio kerosene amount to N$0.30 per lite and the output of the further processing is 90% of refined bio kerosene, which is sold at N$4.50 per litre 10% of the output is a waste product that is sold at N$5 per litre as a pesticide after further processing costs of N$3 per litro and fixed cost of N$9 977 per month has been incurred. It is company policy to value inventory on the basis of First In, First Out (FIFO) and to deduct the net realisable value (NRV) of by products from the joint productions costs. Joint costs are allocated to joint products using the NRV method The following transpired in the month of September 2021: 500 000 kilo of jatropha seeds were purchased at N$0.50 per kilo. Page 3 of 7 The sales were as follows: Bio-diesel Refined bio kerosene Cosmetic paste (by product) Pesticides (by product) 160 000 litre 260 000 litre 20 000 litre 25 000 litre Note: 1 kilo = 1 litre, therefore 1 000 kilos of input (Jatropha seeds) yield 1 000 litres of output. The only opening inventory was 30 000 litres of bio kerosene valued at N$0.80 per litre. There was no beginning or closing inventory work-in-process on hand. REQUIRED: Marks Sub- Total Total 9 9 9 2 3. Prepare a schedule showing the joints costs allocated to the joint products for September 2021 3.2 Determine the production cost per unit for each of the two joint products for September 2021 (round to two decimal places) 3.3 Calculate the gross profit per joint product for September 2021 (round total values to the nearest N$). Total 11 4 15 15 QUESTION 4 (20 MARKS, 36 MINUTES The management of BETA Limited developed the following static budget for one of its flagship product, and estimated that 30,000 units would be sold during the month of August 2021. Actual Static budget Units sold 40 000 30 000 Revenue Cost of sales Materials Labour Factory overhead 2 360 000 (1 732 000) 760 000 632 000 340 000 $ N$ 1 800 000 (1 290 000) 600 000 450 000 240 000 Gross profit 628 000 510 000 Period costs Selling and distributions Administrative expenses Operating income (348 800) 128 800 220 000 279 200 (320 000) 120 000 200 000 190 000 Page 4 of 7 0 However, due to an expected increase in demand 40 000 units were sold. Since the sales figures are higher than expected the management needs to analyse all variances and decide whether a future revision of its budgets would be appropriate. REQUIRED: Marks Calculate the following: 4.1 (0) Material cost per unit 3 (10) Labour cost per unit (i) Selling price price per unit 42 Based on the information provided to you, what would be the appropriate 1 recovery rate for factory overhead? Prepare a flexible budgeted statement for comprehensive incomes for 40 000 units using the above information from a static budget for 30 000 units showing 4.3 16 clearly columns disclosing information for actual, flexed and variance. Denote the variance with U for unfavourable and F for favourable. 20 QUESTION 5 (20 MARKS, 36 MINUTES) Elso Ltd ("Elso") manufactures large-scale solvents for factories and household cleaning. The company uses standard costing system as a way of monitoring its cost. The following information is available for Elso for the month of August 2021 Budgeted Sales and production volume 600 barrels Standard selling price per barrel Standard variable cost per barrel N$855 N$1 750 20 ods barets Actual Sales and production volume Actual selling price per barrel Actual variable cost per barrel 620 barrels N$1 690 N$863 Additional information Standard cost card for ono barrel of solvent Direct materials 34 litres @ N$15 per litre Direct labour 15 hours @ N$12,50 per hour Variable overheads 15 hours @ N$ 10,50 per hour NB: Overheads are absorbed on the basis of direct labour hours. Page 5 of 7 Actual cost and usage information Direct materials Direct labour Variable overheads Total cost Total usage (NS) 20 410 litres N$321 500 9 420 hours N$117 800 N$95 600 MARKS REQUIRED: Calculate the following variances and indicate whether the variance obtained Is favourable or unfavourable. 5.1. Material price variance BP-SP) SR 5.2. Material usage variance A-59) De 5.3. Labour rate variance 5.4. Labour efficiency variance 5.5. Variable overheads expenditure variance 5.6. Variable overheads efficiency variance 5.7. Explain the possible causes of the type of variance obtained in 5.1 and 5.37 TOTAL MARKS 3 3 3 3 3 2 20 Page 6 of 7 QUESTION 6 (10 MARKS, 18 MINUTES The following selected data relate to the Mexit Division of Swifty Enterprises (SE): Sales revenue Uncontrollable fixed costs traceable to the division N54 580,000 1,360,000 Allocated corporate overhead Controllable fixed costs traceable to the division 590.000 1,120,000 40% Variable costs MARKS 2 1 REQUIRED: 6.1. Compute the following for the Mexit Division: a. Segment contribution margin; b. Controllable profit margin: c. Segment profit margin 6.2. When analyzing the Mexit Division as a resource investment for SE, which of the three measures should be used? Why? 6.3. Assume that Mexit's management decided to construct a segmented income statement that reflected the company's five operating departments. Is it possible to trace all of the N$1,120,000 in controllable fixed costs to the departments? Explain briefly 6.4. Which of the five dollar values stated in the body of the problem would be utilized to calculate Swifty Enterprises' income before taxes? 2 1 10 TOTAL MARKS <<<END OF QUESTION PAPER>>> Page 7

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