FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION

DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE

QUALIFICATION : BACHELOR OF ACCOUNTING

QUALIFICATION CODE: 07BACC LEVEL: 6
COURSE NAME: COST AND MANAGEMENT
COURSE CODE: CMA611S
ACCOUNTING 201
SESSION: MAY 2023 PAPER: THEORY AND CALCULATIONS

DURATION: 2 HOURS MARKS: 50

TEST 3
EXAMINER(S) Mr Sheehama, K.G.H. Ms Kangala, H.

MODERATOR: Mr Tjondu, K.

INSTRUCTIONS

Marking scheme

THIS MARKING SCHEME CONSISTS OF _5_ PAGES (Including this front page)
QUESTION 1 (10 Marks)

a)
September October 2 Marks
Production units 5 000 6 000
N$ N$
Fixed production POR per unit
N$25 000√ / 6 250√ 4 4 2
Absorbed fixed overhead 20 000 24 000
Actual fixed overhead 25 000 25 000
(Under)/ Over absorption -5 000 - 1 000

b)

Absorption costing unit cost N$/unit

Direct Materials 25
Direct Labour 20
Variable Production Overhead 5
Fixed Production Overhead (see working) 4
54

Profit Statement using Absorption Costing

September October 8 Marks

N$ N$
Sales revenue 332 500√ 385 000√ 1

Cost of sales/Production costs 256 500 297 000

Opening Inventory -½ 13 500½ 1
Cost of goods produced 270 000½ 324 000½ 1
Closing Inventory (13 500) ½ (40 500) ½ 1

Gross profit 76 000 88 000

Non production Costs 58 250 55 750

Variable Sales & Marketing Overhead 9 500½ 11 000½ 1
Fixed Sales & Marketing Overhead 25 000½ 25 000½ 1
Fixed Administration Overhead 18 750½ 18 750½ 1
(Under-absorbed) / Over-absorbed fixed production
overhead 5 000½ 1 000½ 1

Net profit 17 750 32 250

2
QUESTION 2 (10 Marks)

Activity‐based costing:
STEP 1: CALCULATE THE ACTIVITY RATE (4 marks)

Activity Annual Cost Cost driver Annual cost Activity Rate Marks
driver volume
Material purchase $1 740 000 Number of 125 orders $13 920
and storage (10%) orders per order  1
Setting up of $4 350 000 Set‐up 57.5 set‐up $75 652.17 per
machines (25%) hours hours set‐up hour 1
Production $9 570 000 Machine 960 machine $9 968.75 per
(55%) hours hours C1 and C2) Machine hour 1
Maintenance $1 740 000 Inspection 45.6 inspection $38 157.89 per
(10%) hours hours ( inspection hour 1
$17 400 000

Calculations:
C1: Number of batches:
Men’s Shoes: 75 000 / 1 000 = 75 batches
Women’s boots: 55 000 / 500 = 110 batches
= 185 batches
C2: Total machine hours:
Men’s Shoes: 75 x 4 = 300 machine hours
Women’s boots: 110 x 6 = 660 machine hours
= 960 machine hours

STEP 2: ALLOCATE THE COST (6 marks)

Men’s Shoes Women’s Boots

Material purchase and $13 920 x 75 $13 920 x 50
storage = $1 044 000½ = $696 000½
Setting up of machines $75 652.17 x 30 $75 652.17 x 27.5
= $2 269 565½ = $2 080 435½
Production $9 968.75 x 300 $9 968.75 x 660
= $2 990 625½ = $6 579 375½
Maintenance $38 157.89 x 6 $38 157.89 x 39.6
= $228 947½ = $1 511 053½
Total $6 533 137 $10 866 863
Fixed overhead cost per pair $6 533 137 / 75 000 $10 866 863 / 55 000
= $87.11 per pair1p = $197.58 per pair1p

3
 QUESTION 3 (30 marks)

a) Trey Ltd: Production Cost Report (Department 1) – Weighted Average method

Quantity schedule Equivalent production
Input Material % Conversion %

11 500 Opening inventory (WIP)

50 000 Units introduced
Units completed and transferred: 41 500 41 500 √ 100 41 500 √ 100
Closing inventory (WIP) 20 000 16 000 √ 80 14 000 √ 70
61 500 61 500 57 500 55 500
Cost statement
Total cost Equivalent Unit cost
(units)
Cost per Equivalent unit N$ N$
Direct material (23 000 + 97 290) 120 290 57 500 √ 2.092 √
Conversion Cost (17 250 + 47 450) 64 700 55 500 √ 1.1658 √
184 990 3.26

Material Conversion Total

Units Transferred
Units started and completed (41 500 x 2.092) 86 818½ 48 380.70½ 135 198.70
(41 500 x 1.1658)
Value of Finished Goods 86 818 48 380.70 135 198.70

Closing Inventory

Closing WIP (16 000 x 2.092) (14 000 x 1.1658) 33 472½ 16 321.2½ 49 793.20

Total 184 991.90

10 Marks

b)
Trey Ltd: Production Cost Report (Department 1) – FIFO method
Quantity schedule Equivalent production
Input Material % Conversion %

11 500 Opening inventory (WIP)

50 000 Units introduced
Units completed and transferred:
- from opening inventory (WIP) 11 500 8 050 √ 70 5 750 √ 50
- from current production 30 000 30 000 √ 100 30 000 √ 100
Closing inventory (WIP) 20 000 16 000 √ 80 14 000 √ 70
61 500 61 500 54 050 49 750

4
 Cost statement
Total cost Equivalent Unit cost
(units)
Cost per Equivalent unit N$ N$
Direct material 97 290 54 050 √ 1.80 √
Conversion Cost 47 450 49 750 √ 0.95√
184 990 2.75

Material Conversion Total

Units Transferred
Cost of opening inventory (WIP) 23 000½ 17 250½ 40 250
Cost to complete opening WIP
(8 050 x 1.80)(5 750 x 0.95) 14 490½ 5 463½ 19 953
Units started and completed (30 000 x 1.80) 54 000½ 28 500½ 82 500
(30 000 x 1)

Value of Finished Goods 91 490 51 213 142 703

Closing Inventory

Closing WIP (16 000 x 1.80) (14 000 x 0.95) 28 800½ 13 300½ 42 100

Available: 14 Marks; Max 12 Marks

c)
Process account
Units N$ Units N$
Opening
WIP b/f 11 500½ 40 250½ Finished units (W3) 41 500½ 142 703½
Materials 50 000½ 97 290½ Closing WIP 20 000½ 42 100½
Conversion 47 450
61 500 184 990 61 500 184 803
5 Marks

d) Process costing relates to environments where masses of identical units are/

batches are produced, which makes it futile to assign costs to individual units or
batches of output but calculate an average cost per unit/ batch. This is unlike job
costing, where each unit or batch of output is unique, which creates the need to
calculate the cost of each unit/ batch produced.
Available Marks: 4; Maximum 3 Marks