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ManAcc Assignment

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19 views4 pages

ManAcc Assignment

Uploaded by

bonolo.moilwe
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Phyllis Bonolo Moilwe

Cost and Management Accounting Assignment


Student number: 202107188
Question 1

1.1

Product E Product M
Selling price 175 125
Variables (124) (87)
Material A 60 24
Material B 10 15
Labour 40 20
Variable Overheads 14 28
Contribution 51 38

Let Product E = X & Product M = Y

∴ C ≥ 51x + 38y (objective function)

Constraints:
Material A: 5x + 2y ≤ 4800
Material B: 2x + 3y ≤ 3900
Labour: 2x + y ≤ 2500
Overheads: 2x + 4y ≤ 5000

1.2

5x + 2y ≤ 4800…………..(1)

2x + 3y ≤ 3900…………..(2)

Multiply equation 1 by 2

Multiply equation 2 by 5

∴ *2): 10x + 4y = 9600………(3)

*5): 10x +15y = 19500..…(4)

Elimination:

 -11y = -9900

∴ y = 900
From equation 1:

5x + 2(900) = 4800

5x = 4800 – 1800

5x = 3000

∴ x = 600

From objective function:

C ≥ 51x + 38y

C ≥ 51(600) + 38(900)

C ≥ 30 600 + 34 200

C ≥ R64 800 – fixed costs

C ≥ 64 800 – 50 000

∴ C ≥ R14 800

1.3

The shadow price means that if one more kilogram of material A were available at the normal price
of R12, this would result in an additional contribution of R7. Therefore, the price of R7 for material A
amounts to a maximum premium that the company should pay to obtain an extra kilogram of
Material A.
Question 2

2.1

Relevant costing
Notes R
Production director (meeting) 1 Nil
Material A 2 1 375
Material B 3 360
Components 4 3 000
Direct labour 5 2 100
Machine hours 6 175
Fixed overheads 7 Nil

Total 7 010

2.2

Notes:

1. Since the production director has already met with the possible client, there is no need to worry
about any future costs because, in the first place, the meeting has already occurred and, in the
second place, the director receives an annual income.

2. Because RFT uses Material A frequently, its replacement cost is of importance value.
RFT incurs no additional costs.

It is a previous expense and RFT will not be selling it because the material is in regular use and

3. Material B needs to be bought for the contract, the cost of this acquisition matters.
needs to be replaced, neither the historical cost nor the resale value is relevant.

While RFT has no other need for this material and there is no indication that the unused 10 litres
can be sold, the full cost of obtaining the 40 litres is the relevant cost even though only 30 litres

4. The components must be bought from HY for R50 each because it is an expense that will be
are needed for the work. The minimum order quantity is 40 litres.

5. There are 75 hours of extra capacity available, and as these hours have no relevant cost, the
spent in the future as a result of the activity being done. This cost is relevant.

relevant cost only applies to the remaining 160 hours. RFT has two options: either hire
temporary workers, which will cost R1,920 plus R180 for supervision, for a total of
R2,100, or use its current workforce and pay them overtime at R14 per hour, for a total cost of

6. The machine will either stay idle or be employed for this work because it is currently rented and
R2,240. The less costly of these options, using temporary workers, is the relevant cost.

has spare capacity. The only expense that matters is the additional R7 per hour in operational

7. It is irrelevant to include fixed overhead expenditures because they are incurred regardless of
costs because the lease will still need to be paid.

whether the activity is completed.

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