QUESTION $1$

$(100$ Marks; $180$ Minutes$)$

Shesha Nami $($Pty$)$ Ltd $($SN$)$ is a well$-$established electronic bicycle manufacturing company operating from its plant and distribution centre in Middelburg $($Mpumalanga$),$ South Africa. The company has a male$-$dominated management team and is well known for its quality products and commitment to sustainability.

SN makes two types of electrical bikes, namely the Electric mountain bike $($E$-$MTB$)$ and the Electric city bike $($E$-$CB$).$ The E$-$MTB has a bigger frame and tyres than the E$-$CB to provide stability and control for more rugged terrains. Both bikes make use of an electric motor, powered by a battery, to assist with propulsion.

$SN$ makes use of an absorption costing system and all its inventory items are valued using the first$-$in$-$first$-$out $($FIFO$)$ method. SN has a $31$ December financial year end.

SN$\text{'}$s STANDARD AND BUDGETED INFORMATION FOR THE $2023$ FINANCIAL YEAR

$1\mathrm{.}1.$ Inventory and manufacturing

The company had no budgeted opening and closing inventory of any type.

$SN$ budgeted to manufacture the electronic bikes in direct proportion to its standard sales mix. The budgeted manufacturing levels for the $2023$ financial year were equal to the company's normal manufacturing capacity.

$1\mathrm{.}2.$ Sales

SN budgeted to sell $24000$ E$-$MTB and $16000E-CB$ units. One bike is equal to one unit. The budget selling price per unit for E$-$MTB and E$-$CB was R$28000$ and R$26000$ respectively.

$1\mathrm{.}3.$ Variable and Fixed costs

The E$-$bike manufacturing starts with the frame and suspension made from Aluminium. The frame and suspension are produced according to the bike's design and specification using various cutting and bonding machinery.

Once the frame and suspension are ready, various components $($wheels$,$ brakes, drivetrain & other components$)$ are attached to the frame. The key components that differentiate E$-$bikes from traditional bicycles are the electric motor and lithium$-$ion battery which are integrated into the bike's frame.

$SN$ employs factory workers for the manufacturing and assembly process. The standard is to allow $8\%$ idle time for these direct labourers.

$[$TURN OVER$]$

Page $3$ of $8$

MAC$3701$

Assessment $02/$S$1/2024$

QUESTION $1($continued$)$

$1\mathrm{.}3\mathrm{.}1.$ Variable costs

The standard variable cost requirements for one E$-$MTB and one E$-$CB unit are:

$\backslash$table$[[,$Requirements per unit,$],[$INPUTS$,$E$-$MTB$,$E$-$CB$,$Budgeted price$],[$Aluminium$,1,8$ kilogram,$1,5$ kilogram,R $42000$ per ton$],[$Electric motor,$1$ electric motor,$1$ electric motor,R $3800$ per motor$],[$Lithium$-$ion Battery,$1$ battery,$1$ battery,R $6000$ per battery$],[$Various components,$\backslash$table$[[1,1$ component$],[$sets$]],1$ component set,R $12500$ per set$],[$Direct labour,$\backslash$table$[[90$ clock minutes$],[$per bike$]],\backslash$table$[[90$ clock minutes$],[$per bike$]],$R $105$ per clock hour$],[\backslash$table$[[$Variable manufacturing$],[$overheads $($VMO$)]],\backslash$table$[[45$ machine$],[$minutes$]],\backslash$table$[[45$ machine$],[$minutes$]],$R$13$ per machine hour$],[$Selling and distribution,Refer to $1\mathrm{.}4,$Refer to $1\mathrm{.}4,$R$50$ per bike$]]$

$1\mathrm{.}3\mathrm{.}2.$ Fixed costs

Fixed manufacturing overhead costs $($FMO$)$ are allocated based on budgeted labour hours and the total budgeted fixed manufacturing overheads were R$20100000.$

$1\mathrm{.}4.$ Selling and distribution costs

Selling and distribution costs were budgeted to be a total of R$3000000$ for the year.

$1\mathrm{.}5.$ Administrative costs