QUESTION $1$

$(20$ Marks$)$

A Cape Town$-$based manufacturing firm, CGH Manufacturing Enterprises $($CGHME$),$ has three production departments and $C)$ and the two service departments $(x$ and $Y).$ As part of the budgeting process, a senior cost accountant employed by CGHME has gathered the following annual overhead costs:

$\backslash$table$[[,$R$],[$Indirect materials:,$],[$Production department A$,250000],[$Production department B$,402500],[$Production department C$,52500],[$Service department X$,10000],[$Service department Y$,50000],[$Indirect labour:,$],[$Production department A$,500000],[$Production department B$,500000],[$Production department C$,750000],[$Service department X$,550000],[$Service department Y$,740000],[$Heating and lighting,$350000],[$Property tax,$400000],[$Insurance of machinery,$180000],[$Depreciation of machinery,$960000],[$Insurance of buildings,$145000],[$Salaries of works management,$4600000]]$

The following information is also available:

$\backslash$table$[[,\backslash$table$[[$Carrying value of$],[$machinery$,R$

QUESTION $2$

$(10$ Marks$)$

The product design and development team at CGH Manufacturing Enterprises has completed the development of a prototype of a product to be manufactured during the forthcoming quarter. The prototype passed through the three production departments $-A,B,$ and $C.$ The following budgeted information on the prototype is available:

The following information relates to the prototype:

$\backslash$table$[[$Direct material requisitioned,R$97470\mathrm{.}43],[$Direct material returned to store,R$1396\mathrm{.}00]]$

Direct labour recorded against the prototype:

$\backslash$table$[[$Production department A$,146$ hours at R$48\mathrm{.}00$ per hour$],[$Production department B$,39$ hours at R$57\mathrm{.}00$ per hour$],[$Production department C$,279$ hours at R$61\mathrm{.}00$ per hour$]]$

A special machine was hired for the production of the prototype at a cost of R$590\mathrm{.}00.$

Machine hours recorded against the prototype:

$\backslash$table$[[$Production department A$,411$ hours$],[$Production department B$,657$ hours$],[$Production department C$,502$ hours$]]$

Price quoted for the prototype, including delivery R$172000.$

CGH Manufacturing Enterprises absorbs non$-$production overhead using the following pre$-$determined overhead absorption rates:

$\backslash$table$[[$Administration and general overhead,$10\%$ of production costs$],[$Selling and distribution overhead,$12\%$ of selling price$]]$

REQUIRED:

The product design and development team is convinced that the manufacturing and non$-$manufacturing costs of the prototype are unlikely to be significantly different from those of the product. Therefore, present an analysis of the total cost and profit or loss attributable to a unit of the product.

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