manufacturing labour) and three indirect-cost pools. The cost pools represent three activity areas at the plant.

Manufacturing Activity Area Budgeted Costs for 2019 Cost Driver used as Allocation base Cost-allocation rate Materials handling R200 000 Parts R0.25 Cutting R2 000 000 Parts R2.50 Assembly R2 000 000 Direct manufacturing labour hours R25.00

Two styles of chairs were produced in March: the executive chair and the chairman chair. Their quantities, direct materials costs, and other data for May 2019 are as follows:

Units produced Direct material costs Number of parts Direct manufacturing labour hours Executive chair 5 000 R600 000 100 000 7 500 Chairman chair 100 R25 000 3 500 500

The direct manufacturing labour rate is R20 per hour. Assume no beginning or ending inventory.

Required:

2.1 Calculate the May 2019 total manufacturing costs and unit costs of the executive chair and the chairman chair.

2.2 The upstream activities to manufacturing (R&D and design) and the downstream activities (marketing, distribution, and customer service) are analyzed, and the unit costs in 2019 are budgeted to be:

Upstream Activities Downstream Activities Executive chair R60 R110 Chairman chair R146 R236

Calculate the full cost per unit of each chair. (Full costs of each chair is the sum of the costs of all business functions in the value chain.)

2.3 Compare the per-unit costs figures for the executive chair and the chairman chair calculated in 2.1 and 2.2 above. Why do these costs differ for each chair? Why might these differences be important to Scheem Company?

Question 3

Alcal Partners uses absorption costing based on standard costs and reports the following data for 2021:

Theoretical capacity 360 000 units Practical capacity 300 000 units Normal capacity 240 000 units Selling price R30 per unit Beginning inventory 25 000 units Production 260 000 units Sales volume 280 000 units Variable budgeted manufacturing cost R3 per unit Total budgeted fixed manufacturing costs R3 600 000

Total budgeted operating costs (all fixed) R1 000 000

The production volume variance is written off to cost of goods sold. For each choice of denominator level, the budgeted production cost per unit is also the cost per unit of beginning inventory.

Required:

3.1 Calculate the production volume variance in 2021 when the denominator level is: a. theoretical capacity b. practical capacity c. normal capacity

3.2 Prepare absorption costing income statement of Alcal Partners using theoretical capacity, practical capacity, and normal capacity as the denominator levels.

3.3 Explain why the operating income under normal capacity utilization lower than the other two scenarios.

3.4 Reconcile the difference in operating income based on the theoretical capacity and practical capacity

Question 4

Global Defense manufactures the Interceptor Missile at its Camden plant. It has two departments: Assembly Department and Testing Department. This problem focuses on the Testing Department.

Direct materials are added when the Testing Department process is 90% complete. Conversion costs are added evenly during the Testing Departments process. As work in Assembly Department is completed, each unit is immediately transferred to the Testing Department. As each unit is completed in the Testing Department, it is immediately transferred to Finished Goods.

Global Defense uses the weighted average method of process costing. Data for the Testing Department for October 2019 are:

Physical Units (Missiles) Transferred-in Costs Direct Materials Conversion Costs Work-in-Process, 1 October* 30 R985 800 R0 R331 800 Transferred-in during October ?

Completed during October 105

Work-in-Process, 31 October** 15

Total costs added during October

R3 192 866 R3 885 000 R1 581 000 *Degree of completion: transferred-in costs, ?%; direct materials, ?%; Conversion costs, 70% **Degree of completion: transferred-in costs, ?%; direct materials, ?%; Conversion costs, 60%

Required:

4.1 Calculate the percentage of completion for the transferred-in costs and direct materials in the beginning WIP inventory, as well as the for the ending WIP inventory.

4.2 Prepare a production statement using the weighted average method.

4.3 Prepare a production statement using the FIFO method