SCHOOL OF MANAGEMENT SCIENCES
DEPARTMENT OF ACCOUNTANCY
ACC 1244/1644
Main Group Assignment
DUE DATE: JANUARY 5th 2021
Email: Mpho.Tshiololi@univen.ac.za
TIME: Before 17H00
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This assignment must be typed.
Handwritten assignments will not be accepted
Late submission will not be accepted
No assignment should be submitted via WhatsApp
Question 1
The Chief Operating Officer of Play-date Manufacturers is concerned with the operating results for
September 2020. They are producers and sellers of various types of toys. As part of the company’s
employee’s development projects, you have recently attended a course on budgeting and decide to use
your experience by applying the principles of flexible budgeting to one of the company’s less profitable type
of toy called Transformers. The following information is made available:
Statement of Profit or Loss and Other Comprehensive Income For The Period September 2020
Units
Sales
Less: Variable expenses
Direct material
Direct labour
Variable overheads
Selling and administrative
Budget
45 000
R1 800 000
R810 000
R360 000
R270 000
R135 000
R45 000
Actual
40 000
R1 600 000
R760 400
R357 000
R253 000
R110 400
R40 000
Contribution
Less: Fixed expenses
Manufacturing overheads
Selling and administrative
Net profit
R990 000
R750 000
R405 000
R345 000
R240 000
R839 600
R753 200
R408 200
R345 000
R86 400
Required:
a) Compile a flexible budget at actual activity level
Question 2
The summary of Premiership Ltd’s transactions for January, February and March 2020 and its expected
transactions for April 2020 are as follows:
Sales (20% Cash and 80% Credit)
Purchases (30% Cash and 70%
Credit)
Salaries and wages
Rental
General expenses
Payment made on loan
January
R110 000
R27 000
February
R90 000
R24 000
March
R75 000
R18 000
April
R60 000
R15 000
R42 000
R600
R9 000
R33 000
R600
R8 000
R30 000
R650
R9 000
R5 000
R12 000
R600
R7 000
Additional Information:
1. The bank overdraft at 1 March amounted to R9 600
2. Interest on a R6 000 investment at 10% per annum is received every six month in October and
April.
3. Credit sales are collected as follows:
 40% in the month of sale
 30% in the first month after sale
 28% in the second month after sale
 2% irrecoverable
4. Credit purchases are paid for within the month of purchase in order to obtain a discount of 2%.
5. All other expenses are paid in cash.
Required:
a) Prepare the cash budget for March and April 2020.
Question 3
Unique Boutique Ltd is a company specializing in custom-made evening dresses. The company usually
cater for each individual customer’s needs by tailor-making a dress according to the specification. The
following is a budgeted contribution format income statement for Unique Boutique Ltd:
R
Sales
Less: Variable cost
Direct materials A (@R10 per kg)
Direct materials B (@R4 per litre)
Direct labour (@R16 per hour)
Variable factory overheads (@R4 per hour)
Contribution margin
Less: Fixed costs
Net income
Additional Information
360 000
(246 000)
120 000
36 000
72 000
18 000
114 000
80 000
34 000
1. The company manufactures and sells a single product. The budgeted units produced and sold (on
which the statement was based) was 6 000 units.
2. The standard usage per unit is as follows:
 Direct materials A
8 kg
 Direct material B
6 litres
 Direct labour
3 hours
 Variable overheads
3 hours
3. Actual results for the period were as follows:
a. Units produced and sold
6 300 units
b. Material A
25 000 kg at a total cost of R124 500
c. Material B
20 160 litres at a total cost of R41 328
d. Direct labour
9 600 hours at R17 per hour
e. Variable overheads
R21 600
Required:
Calculate the following variances and state the possible causes for the variances:
a.
b.
c.
d.
e.
f.
g.
h.
Material price variance for material A
Material price variance for material B
Material usage variance for material A
Material usage variance for material B
Total material variance
Labour rate variance
Labour efficiency variance
Total labour variance
i.
j.
Variable overheads efficiency
Variable overheads spending
Question 4
The present market for golf balls is estimated at 80 000 balls per month and market research indicates that
with a selling price of R3 per golf ball, a market penetration of one third to a half can be achieved within 12
month. Your company has devised a process which will produce golf balls with a fixed cost of R97 500 per
month and a variable cost of R1,50 per ball.
Required:
a.
b.
c.
d.
e.
Calculate the contribution margin (CM) ratio.
Calculate the breakeven point in units and in rands.
Calculate the number of golf balls that must be sold in order to earn a target profit of R52 500.
Calculate the margin of safety as a percentage. (Round off to the nearest whole number)
Further market research reveals that at a selling price of R2,80 the company could reach sales of
135 000 balls.
a. Calculate the profit to be made, if the company sells 135 000 golf balls per month. (Draft a
marginal costing income statement.)
b. Calculate the new breakeven point in units.
c. Should the company reduce the selling price? Give a reason for your answer.