SCHOOL OF BUSINESS, ECONOMICS AND MANAGEMENT
AFIN 210 – COST AND MANAGEMENT ACCOUNTING
1ST ASSIGNMENT - FOR FULL-TIME, PART-TIME AND DISTANT STUDENTS
ISSUE DATE: 8TH FEBRUARY 2021:
DUE DATE:
10TH MARCH 2021 TIME-- BY 23.59 Hours.
SUBMISSION INSTRUCTIONS
1.
Answer ALL Questions
2.
The assignment should be word processed/typed using Aerial font size 12, 1.5
spacing OR handwritten and scanned.
3.
The assignment should be submitted electronically in Moodle
4.
The assignment must be submitted by the due date otherwise marks will be
deducted for late submission. Penalties for late submission will be effected.
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QUESTION ONE
Case study
Dingani and Pumla Feza are business partners. They both worked for a railroad
company for 30 years. At age 57, Dingani and age 52, Pumla retired and moved to the
small town of Mfumbeni, which has a population of approximately 3,500 residents.
When the Fezas moved to the town, they decided to start a child care business in their
home called Nanna’s House.
Nanna’s House is licensed by the local municipality. The municipality charges an annual
fee of K225 to maintain the license. Insurance is required at a cost of K3,840 annually.
The facility is licensed to care for a maximum of six children. The Fezas charge a fee of
K800 per month for each child. The monthly fee is based on a full day of care, from 8:00
a.m. to 4:00 p.m. If additional time is required beyond 4:00 p.m., parents must pay an
additional charge of K15 per hour for each child. The Fezas provide two meals and a
snack for the children. The cost of the meals and snack is K3.20 per child per day.
There are six children currently enrolled.
The facility is very nice. It is an 820 square foot addition to their home that was built in
1964. The Fezas purchased the home and completed the renovations for K79,500 and
they believe the addition has a useful life of 25 years. The facility has a large open
space for play, reading, and other activities. There is a section for sleeping which
contains small cots. The facility is equipped with a small kitchen, two bathrooms and a
small laundry area.
The daycare increased the Fezas’ utility cost by K50 each month. During the first week
of operations, the washer and dryer stopped working. Both appliances were old and had
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been used by The Fezas for many years. The old appliances cost a total of K440. While
a laundry room was not initially a necessity, it became increasingly important for
laundering the soiled clothes of the children, blankets, and sheets. A company nearby,
Red Oak Laundry and Dry Cleaning, can launder clothing for the Fezas, including pickup and delivery, for K52 per month. Alternatively, the Fezas can take clothes to the
laundromat once a week, which is three miles away (one way). The applicable mileage
rate is K0.56/mile. They can launder the clothes themselves at a cost of K8 per week.
The self-service alternative does not include detergent and fabric softener. The The
Fezas would need to purchase these items in order to use the laundromat. Purchasing
laundry supplies in bulk from MegaMart would cost K35 every quarter.
The final alternative is for the Fezas to purchase a washer and dryer. The cost of the
appliances is:

washer K420

dryer K380.
The additional accessories for both appliances, needed for installation, cost K43.72.
The store will deliver the appliances at a total cost of K35. The cost of installing the
appliances is free. Both appliances are expected to last 8 years. According to the
manufacturer the washer will increase energy costs by K120 per year. The dryer will
increase energy costs by K145 per year.
The Fezas need some assistance in decision making and evaluation. They have
contacted you, their accountant, to provide some advice.
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REQUIRED:
Respond to the following Case-based questions to help the Fezas make their decisions.
(If necessary, the Fezas will use straight line depreciation. For monthly calculations, use
4.33 weeks per month.)
1. Consider the different types of costs discussed in this course. List the costs
discussed in the case in a table and provide one specific example of each.
Example
Amount(K) Cost
Description Why you say it is that type of cost
classification
1. 225
Fixed cost
classification
Annual
The license fee does not change
license fee
regardless of the business activities
[34 marks]
2. Based on the information provided, what information is relevant to the decision to
purchase the laundry appliances? What information is irrelevant to the decision to
purchase the appliances? Why?
[10 marks]
3. What could it cost the the Fezas to launder clothes? Show your detailed calculations
for each.
[10 marks]
4. The Fezas has made a significant investment in this business. How long will it take
for the the Fezas to recoup their investment? Is the time required to recoup the
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investment a good measure of the success of the company? If not, how would you
measure the success of the company? Explain.
[10 marks]
5. As their accountant, prepare a letter to the Fezas advising them on their laundry
needs. What is your recommendation and why?
[10 marks]
6. The Fezas have a waiting list for their daycare. They can hire an employee for K9 per
hour for 40 hours each week. With the additional employee, the Fezas can accept three
additional children. Should the Fezas hire the additional employee? Show your detailed
calculations.
[10 marks]
7. The Fezas home can accommodate a maximum of nine children. They can move the
daycare from their home to rented space in town, which can accommodate up to 14
children. The space will cost K650 per month and the utilities will cost K125 per month.
Additionally, insurance will now cost the Fezas K5,000 per year. Per municipality
regulations, each adult can supervise no more than three children. As their accountant,
prepare a letter to the Fezas advising them on their space options. Should they continue
to operate the facility at home or should they rent space in town? How many children
should they accept? How many employees will they need to hire? Show your detailed
calculations for each scenario (operate the facility at home or rent space in town).
[16 marks]
[100 marks x 0.5= 50 marks]
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QUESTION TWO
IceeBee61 Manufacturers uses activity based costing model to compute product costs.
During the coming year the company expects to produce 25000 units of Reg model and
6500 units of Super Model. Data on these products is as follows:
Cost Center
Labour
Machine
setup
Product
testing
General
factory
Total
Cost Driver
Reg
Direct labour 8000
hours
Number of
500
set ups
Number of
6400
tests
Machine
30000
hours
Level of activity
Estimated
overheads (K)
Super
2000
Total
10000
80000
900
1400
420000
1600
8000
600000
15000
45000
90000
1190000
1. In a tabular format, calculate the Overhead absorption rates for each cost center
[14 Marks]
2. In a tabular format, calculate the total overhead cost assigned to each product
[20Marks]
3. Calculate the overhead cost to be included in the cost of each unit. [6 Marks]
[40 Marks]
TOTAL MARKS: 90
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