FACULTY OF COMMERCE, MANAGEMENT & LAW

SCHOOL OF ACCOUNTING

C3613FM – MANAGERIAL ACCOUNTING 1

TUTORIAL BOOKLET – 2025

UNIT 1 – TUTORIAL

Question 1

The following cost data for the year ended 31 December 2024 pertains to Oryx (Pty) Ltd, a
greeting card maker:

N$
Direct material 2,100,000
Advertising expense 99,000
Depreciation on factory building 115,000
Direct labor wages 485,000
Cost of finished goods inventory at year-end 115,000
Indirect labor wages 140,000
Production supervisor's salary 45,000
Service department costs1 100,000
Direct labor: fringe benefits 95,000
Indirect labor: fringe benefits 30,000
Fringe benefits for production supervisor 9,000
Total overtime premiums paid 55,000
Cost of idle time: production employees2 40,000
Administrative costs 150,000
Rental of office space for sales personnel3 15,000
Sales commissions 5,000
Product promotion costs 10,000

Notes:
1. All services are provided for the manufacturing department.
2. Idle costs are expenses and are not included in the above direct labor wages.
3. It became necessary to rent retail space when the sales office changed to a storage place
for raw materials.

REQUIRED: Calculate the following, and clearly show all your workings: MARKS
1.1. Prime cost 1.5
1.2. Total manufacturing overhead cost 8
1.3. Conversion cost 1.5
1.4. Total production costs 1
1.5. Total period costs 3
TOTAL MARKS FOR QUESTION 1 15

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Question 2
The Ministry of Health and Social Services has been recording the number of people who tested
for COVID-19 in Windhoek, Robert Mugabe Center since January 2024. The Centre’s records
show that the cost of carrying out health checks in the last five months have been as follows:

Month’ 2024 Number of people tested Total cost (N$)

January 1 300 34 250
February 1 880 35 600
March 2 520 37 300
April 1980 35 780
May 2 300 36 720

Given the inconsistency in the cost pattern, the Robert Mugabe Center would like to estimate the
expected total cost for June 2024.

REQUIRED: Marks

Use the high low method to determine the cost equation for the Robert Mugabe Center,
2.1 and calculate the expected total cost for June 2024 if 2 500 people are expected to be 6
tested.

What would the cost equation be if simple regression was used to estimate it?
Simple regression formulae:
2.2 12
Ʃxy = aƩx + bƩx² ……………(i)
Ʃy = na + bƩx………………….(ii)

TOTAL MARKS FOR QUESTION 2 18

Question 3

Question 3.1
Sewing industries is a factory located in divundu that specialises in assembling mini-sewing
electrical machines which are portable and which can be used in close proximity.
The business has provided you with financial data for the year ended 31 May 2024 extracted from
their books.
N$
Cost of components 600 000
Wages for workers assembling 400 000
Factory overheads 300 000
Administration 336 000
Selling expenses 224 000
Distribution charges 140 000
Sales 2 500 000

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The factory produced 10 000 mini-sewing electric machines in the ended 31 May 2024.
The following additional information is given:
1) The following items will occur based on previous years’ figure:
(i) The price of materials will increase by 20%.
(ii) Wages will increase by 10%
(iii) Manufacturing expense will increase in proportion to the combined cost materials and
wages.
2) Other expenses will remain unchanged.
3) Once the assembly has been complete the sales department expects the mini-sewing
electrical machines to be transferred at a margin of 20% on sales from the factory.

REQUIRED: MARKS
3.1 Prepare a schedule of cost of goods assembled. 5

Question 3.2
The following data relate to the overhead expenditure of a contractor who undertakes industrial
repairs and maintenance for the first six months in 2024.
Month Jan Feb Mar April May Jun
Maintenance cost-N$ 630 500 700 550 780 800
Maintenance hours 7 950 7 400 8 280 7 630 9 100 9 800

Where there more than 1 000 hours incurred in maintenance, it is necessary for the business to
employ an additional supervisor at any site at an extra fixed cost of N$ 5 575.

REQUIRED: MARKS
Using least squares determine the cost function.
3.2.1 Ʃxy = aƩx + bƩx² ……………(i) 8
Ʃy = na + bƩx………………….(ii)
3.2.2 Calculate the total cost at 1 200 Maintenance hours. 2
Total marks 10
Total marks question: 15

Question 4

COPU Cc reports the following cost information for the month of June 2024, data has been
tracked for saddling costs which are 66.25% of indirect costs.

Month Mar’ 24 Apr’ 24 May’ 24 Jun’ 24

Saddling cost (N$) 7 600 8 500 10 000 8 700

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 Units produced 800 1 000 1 200 1 100

The production process presents the following information:

N$
Direct materials inventory 1 June 2024 900
Direct materials purchased 3 600
Direct material used 3 750
Total manufacturing overhead 16 000
Prime costs costs 8 000
Total manufacturing costs ?
Work-in-process inventory 1 June 2024 2 250
Work-in-process inventory 30 June 2024 3 500
Finished goods inventory 1 June 2024 1 250

Ms. R Katjomuise, the owner of COPU Cc was advised to apply a mark-up of 20% to maximize
sales demand as she attempts to enter the Namibian market. COPU sold all the units produced
in June 2024.

REQUIRED: MARKS
Present a cost equation to be used to estimate Saddling costs for
4.1 3
COPU Cc using the high-low method.
Using the cost equation presented above, how many units were 3
4.2
produced during June 2024?
4.3 Calculate conversion costs from the information provided. 2

4.4 Calculate Cost of goods manufactured and production cost per unit. 4

4.5 Calculate Gross profit and advise the owner on the mark-up proposed. 6

TOTAL MARKS FOR QUESTION 4 18

Question 5

This question is divided into two sections, 5.1. and 5.2., which are independent of each other.
Please answer each section in the context in which it has been asked.

5.1. (10 Marks)

Saima Petrus, a University of Namibia alumnus is an experienced cost accountant. She recently
took over the role of cost accountant at Namib Breweries Ltd, a company that produces

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beverages. The previous cost accountant left the company abruptly without notice leaving the
accounting records in disarray. Saima requires the ending inventory balances for the fourth
quarter financial report.
The following information is available:

N$
Direct materials purchased 480 000
Work-in-progress (1 Oct 2022) 140 000
Direct materials (1 Oct 2022) 50 000
Finished goods (1 Oct 2022) 640 000
Conversion costs 1 320 000
Total manufacturing costs added during the period 1 680 000
Cost of goods manufactured 4 times direct
materials used
Gross margin 25%
Revenues 2 075 000

REQUIRED: MARKS
5.1.1. Calculate Direct materials (31 December 2022) 4
5.1.2. Calculate Work-in-progress (31 December 2022) 3
5.1.3. Calculate Finished goods inventory (31 December 2022) 3
Total marks for 5.1. 10

5.2. (8 Marks)

Oryx Properties Ltd is an entity involved in property management across Windhoek. You are
provided the following for the month of March 2023 relating to their maintenance costs incurred
by their employees:

Period (n) Activity units Associated XY X2

(X) cost (N$) (Y)
1 1,300 34,250 44,525,000 1,690,000
2 1,880 35,600 66,928,000 3,534,400
3 2,520 37,300 93,996,000 6,350,400
4 1,980 35,780 70,844,400 3,920,400
5 2,300 36,720 84,456,000 5,290,000
Total 9,980 179,650 360,749,400 20,785,200

REQUIRED: MARKS

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 5.2.1 Using the table above, state the initial simple regression formulae. 1
Using the high-low method, determine the cost equation that Oryx Properties Ltd can use
5.2.2 5
to estimate total cost.
Using the cost equation obtained in 5.2.2, how many activity units are required to
5.2.3 2
accumulate a cost of N$ 35 375?
TOTAL MARKS FOR QUESTION 5.2 8
TOTAL MARKS FOR QUESTION 5 18

Question 6

REQUIRED: Answer the following questions; MARKS

6.1 Distinguish between product costs and period costs. 4

6.2 What is an opportunity cost? Give an examples. 3

Distinguish between relevant and irrelevant costs and provide examples of

6.3 2
costs for each type of cost

6.4 Explain the meaning of the term ‘sunk costs’. 2

Distinguish between avoidable’ and ‘unavoidable’ costs.

6.5 4
and provide an illustration.

TOTAL MARKS FOR QUESTION 6 15

Question 7

Windhoek Porcelain (Pty) Ltd (WP), a well-known manufacturer of crockery in Khomas region, is
considering launching a new line of mugs. The mugs will be hand painted in a Namibian theme.
The company undertook market research in the previous year, which indicated that the mugs
would be particularly popular with tourists visiting Namibia.

The company will employ a trained artist to paint the mugs, who will be paid a fixed wage of N$60
per hour. The artist will be able to paint one mug every half hour. The company will also employ
a new machine operator at a wage of N$40 an hour, who will work approximately 1 900 hours
during the year. One of the current supervisors in the company will supervise the manufacturing
of the mugs in addition to his existing duties. His salary will be increased from N$15 000 to
N$17 000 per month to compensate him for the additional responsibility.

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 The mugs will be manufactured from porcelain which can be purchased at a cost of N$16 per
mug. Indirect materials required will amount to N$6 per mug. The company has paint on hand
which was purchased six months ago which can be used for the mugs. The paint has a current
replacement value of N$3 900. The mugs will be baked in the same oven as the other crockery,
the oven is currently not used to full capacity. The manufacturing process for mugs also requires
a special machine which can be leased for N$2 600 per month. Electricity relating to the special
machine amounts to N$1 200 per month.

The manufacturing process will require 15% of the factory floor space, which is not being used at
present. The factory is rented at N$23 000 per month. The company has budgeted for the
production and sale of 3 800 mugs for the year. A sales representative will sell the mugs for a
commission of N$9 per mug. Marketing and distribution costs will amount to N$1 500 per month.

REQUIRED: MARKS

7.1 Explain what a cost object is, and identify the cost object for WP Pty. Ltd. 2

Calculate the prime cost, manufacturing cost and total operating cost of the new
7.2 mugs for the first year of production to assist management of WP Pty. Ltd in 10
deciding on whether to launch the new line of mugs.
Using your calculations in (a) above, calculate the required sales price per mug if a
7.3 2
profit mark of 25% on cost price is required.
The existing factory maintenance and repairs is N$195 000 if 115 000 indirect
labour hours are worked, and N$242 250 if 160 000 indirect labour hours are
7.4 worked. Calculate the fixed element of the maintenance and repairs cost for the 4
factory. Determine the projected maintenance and repairs cost at a level of
145 000 indirect labour hours.
TOTAL MARKS FOR QUESTION 7 18

UNIT 2 – TUTORIAL 2

Question 1

1.1
Cuma Culinary CC is a retailer dealing in fast moving consumer goods with multiple distribution
outlets in Rundu and Nkurenkuru. The business keeps in stock a popular product known as
Kavango crisps sold in 100g packets, for which the following information is available:

Average sales 75 packets per day

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 Maximum sales 95 packets per day

Minimum sales 50 packets per day

Lead time 12-18 days

Re-order quantity 1 750 packets

Relevant information:
(i) The cost per packet is N$ 5.
(ii) Transport costs applicable to these units is 10 cents per packet.
(iii) The business incurs an ordering cost of N$ 100 per order.
(iv) Inventory holding cost is 10% of the cost per packet.

REQUIRED: Base on the above data: MARKS

At what inventory level would a replenishment order be issued? Show your
1.1.1 2
calculations
What is the quantity that should be ordered to reduce inventory costs to a
1.1.2 5
minimum? Show your calculations.
1.1.3 What is the maximum inventory level? 3
Sub-total 10
Explain any five objectives of holding inventory in any form of business
1.2 10
organisation.
Total marks question for question 1: 20

Question 2

2.1. Namib Diary produce Grape Juices in 1 litter Containers. The Grapes Department receives
the Grapes, and issues it to production as needed. On 1st April 2024 there were 50kg Grapes
valued at N$2 per kg in inventory. The following table gives a summary of the flow of Grapes
during April 2024. The Grape Department’s policy regarding the First-in-first-out method is that all
Grapes received back from production, are handled in the manner that it can be issued first at the
price at which it was received.

Date Flow of nuts

5 April 2022 Buy 100kg Grapes at N$2.80 per kg.

7 April 2022 Send 10kg Grapes back to the supplier (these Grapes were bought on 5 April
2024).

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 10 April 2022 Issue 60kg Grapes to production.

15 April 2022 Receive 20kg Grapes back from production (these Grapes were issued on 10
April 2024). Note: this was issued at N$2 per kg on the perpetual inventory
system.

20 April 2022 Issue 40kg Grapes to production.

26 April 2022 Buy 80kg Grapes at N$2.50 per kg.

29 April 2022 Issue 50kg Grapes to production.

REQUIRED MARKS

Complete a stores ledger card according to the First-in-first-out-basis on the

2.1 10
perpetual inventory system

Total Marks for Question 2.1 10

2.2. A company manufactures a product from a raw material, which is purchased at N$54 per kg.
The company incurs a handling cost of N$350 plus freight of N$400 per order. The incremental
carrying cost of inventory of raw material is N$0.50 per kg per month. In addition, the cost of
working capital finance on the investment in inventory of raw material is N$8 per kg per annum.
The annual production of the product is 94,500 units and 2 units are obtained from 1 kg of raw
material.

REQUIRED MARKS

2.2.1 Calculate the economic order quantity of raw materials. 3

2.2.2 Advise, how frequently (in days) should orders for procurement be placed. 2

2.2.3 If the company proposes to rationalize placement of orders on quarterly basis, 5

what percentage of discount in the price of raw materials should be negotiated?

Total Marks for Question 2.2 10

Question 3

ABC Ltd is planning to launch a new product and budgets to use an annual 54 560 units of a
special material for production. The material will be used during the year at an even rate. The

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purchasing manager has decided he is going to place orders for 1 760 units at regular intervals
during the year.

The costs associated with the material are as follows:

1. Purchase price N$ 3.84 per unit.

2. Ordering costs N$ 6.40 per order.

3. Holding costs per unit are 20% of the purchase price.

REQUIRED: MARKS

3.1 Based on the 1 760 units calculate the annual ordering cost 2

3.2 Based on the 1 760 units calculate the annual holding costs 2

3.3 Calculate the Economic Order Quantity and explain what it means 6
Calculate the difference in the ordering and holding costs between the order
3.4 quantities suggested by the purchasing manager and the units you computed in 4
3.3.
The supplier is keen to encourage ABC Ltd. to order in bulk and has offered a
discount of 10% on all purchases for an order quantity of 6 400 units. (Assume
the order quantity prior to the discount offer is the amount calculated using the
3.5 EOQ as calculated in part 3.3 above). 6

Advise whether or not this discount is financially beneficial to ABC Ltd.

TOTAL MARKS FOR QUESTION 3 20

Question 4
ABC Limited based in Otavi specializes in manufacturing furniture for schools and offices. They
have been facing cash flow challenges due to delayed payments from their clients and are seeking
cost-saving measures to improve their liquidity problem. The company sources its timber from a
single supplier located at Nkurenkuru, Kavango West region. Currently, they order 2 000 cubic
metres of timber per month from the supplier, priced at N$500 per cubic metre. The supplier
charges a delivery fee of N$1 000 per order. Holding costs for inventory are estimated as the
aggregate of 0.01% of the timber's purchase price per month and 0.05% of annual lease payment
which is fixed at N$100 000 per annum. Ordering costs amount to N$500 per order.
In response to ABC Limited's request for cost reductions, their timber supplier recommends three
alternative offers:
Offer 1: Maintain the current pricing and delivery terms.

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 Offer 2: Reduce the delivery fee by 50%, with no change in timber prices but increase
quantity ordered to 1 000 cubic metre per order.
Offer 3: Will assist ABC to decrease ordering costs by 20%, while other costs and EOQ
remain unchanged.

REQUIRED: MARKS
As a management accountant of ABC Limited, analyse the three offers
provided by the supplier and recommend the one that will financially suits
4.1 18
ABC Limited in their quest to improve the liquidity. Your recommendation
should be based on your calculations and case analysis.

4.2 State and explain any two drawbacks of stock-outs in a business. 2

TOTAL MARKS FOR QUESTION 4 20

Question 5
5.1 Papercut Cc is a small manufacturing company that is attempting to value a raw material used
to produce one of its popular products. The company buys more and more stock of the material
to fulfil the growing demand and measuring the value of that inventory with more accuracy has
become more important.

Quantity Unit
(kg) price/kg
1June 2023 Balance 1 000 N$ 5.50
5 June 2023 Receipts 1 500 N$ 6.30
7 June 2023 Receipts 2 000 N$ 6.70
13 June 2023 Issued 2 300
19 June 2023 Receipts 2 900 N$ 5.80
26 June 2023 Issued 3 850

The Production Manager is considering a review of the inventory control policy, and he requests
your advice.

REQUIRED: MARKS

What is the difference between the periodic and perpetual inventory system? 1.5
5.1.1
Why would you advice the company to pursue a perpetual inventory system?
Compile a stores ledger card and calculate the value of inventory for the 5.5
5.1.2
month of June using the First-in-first-out (FIFO) method.
Compile a stores ledger card and calculate the value of inventory for the 7
5.1.3
month of June using the Weighted Average method.
Why is inventory valuation important and why does the choice of method 1
5.1.4
matter?
TOTAL MARKS FOR QUESTION 5.1 15

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5.2 Given an average lead time of two weeks, and increasing carrying costs, the company needs

Inventory Account
N$ N$
Opening balance (1) 33 000 Work-in-progress (3) 137 000
Creditors (2) 146 000 Materials returned to supplier 2 000
Material returned to stores 4 000 Production overhead account (4) 4 000
Profit or Loss (5) 3 000
Closing balance (6) 37 000
183 000 183 000
a strategy that will help them manage their inventory of this component more efficiently. Their
average usage is 1 500 units and again, you have been called on to advise on how to manage
those inventory levels.

REQUIRED: MARKS

What is the Economic Order Quantity and give three examples of carrying 2
5.2.1
costs.
How many units will they have to reorder (level) if the lowest level of 2
5.2.2
inventory that avoids production disruptions is 2 500 units.
How is reorder quantity different from EOQ and explain the effect on 1
5.2.3
inventory management.
TOTAL MARKS FOR QUESTION 5.2 5
TOTAL MARKS FOR QUESTION 5 20

Question 6
6.1 Study the following ledger account and answer the question below.

REQUIRED: MARKS
6.1 Explain the entries numbered 1 to 6 6

6.2. Nkurenkuru plumbing CC uses both plastic and steel pipes in when building water and
sewage systems in residential homes as well commercial buildings. The business orders 3 000
plastic pipes from its main supplier with every order, Eenhana Engineering Limited, periodically
a quantity that reduces the holding and carrying costs to a minimum. The pipes cost N$150 per
unit (having a length of 10 metres) when bought in quantities agreed with the main supplier. The
carrying cost is estimated to be 2% of unit inventory investment while it costs N$180 to order
and process the delivery. It takes a maximum of 45 days to receive the pipes from the date the

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order is made and the maximum pipes used is a monthly average based on the annual
requirement. Assume that there are 365 days in a year and 30 days in a month.

REQUIRED: MARKS
How many pipes does Nkurenkuru plumbing CC needs to satisfy the its
6.2.1 6
customer requirement annually?

6.2.2 What is the frequency of making order in days based on the EOQ? 2

6.2.3 Based on the above information calculate the re-order level. 3

6.2.4 What are 3 differences between a bin card and a stock ledger? 3

TOTAL MARKS 20

Question 7
Sammys’ is a manufacturer of bits and pieces. The following table represents items as they
moved through inventory in the month of May 2024,

Date Units Unit

Price (N$)
1 May Opening
inventory 1000 5
5 May Purchased 500 5.50
9 May Sold 200 12
12 May Purchased 600 6.75
17 May Sold 1 500 13
24 May Purchased 400 5.75

Their cost accountant prepared the following stores ledger card for the month of February:

Receipts Issues Balance

Price Amt. Price Amt. Price Amt.

Date Qunt. Qunt. Qunt.
(N$) (N$) (N$) (N$) (N$) (N$)
1 May 1000 5 5 000

5 May 500 5.5 2750 500 5.5 2 750

9 May 200 5.5 1 100 1000 5 5 000

300 5.5 1 600

Assume the re-order quantity (REQ) is the average of quantities purchased for this month and
the frequency of placing orders remains consistent throughout the year. The lowest level that
inventory could drop without causing production/sales disruptions or stock outs is 445 units.

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 REQUIRED: MARKS
Which method of inventory valuation has been applied this far, explain
7.1 1
your answer?
Determine the value of closing inventory 17th of May using the FIFO
7.2 7
method.
How many orders were placed and what is the annual demand for
7.3 3
Sammys’?
7.4 What is the average stock level? 2

TOTAL MARKS FOR QUESTION 7 13

UNIT 3 – TUTORIAL 3

Question 1

1.1. XYZ Co., has observed that a 90% learning curve ratio applies to all labour related costs
each time a new model enters production. It is anticipated that 320 units will be manufactured
during April 2024. Direct labour cost for the first lot of 10 units amounts to 1,000 hours at N$8 per
hour. Variable overhead cost is assigned to products at the rate of N$2 per direct labour hour.

REQUIRED: Calculate, MARKS

1.1.1 The total labour and labour-related costs to manufacture 320 units of output. 4

1.1.2 Average cost of the first 40 units produced 2

1.1.3 Average cost of the first 80 units 2

1.1.4 Incremental cost of units 41– 80 1

Total Marks for question 1.1 9

1.2. A company has employed 10 workers that are paid N$20 per hour. The employees work 8
hours a day Mondays to Fridays and they get 2 weeks’ holiday leave per year. Other fringe
benefits such as employer contributions to medical aid and pension amount to R24 200. Public
holidays for the year will be 10 and a normal idle time of 10% of available working hours is allowed.
A holiday bonus of R35 000 will be paid. The company uses a 12 months’ calendar.

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REQUIRED MARKS

1.2.1 Compute the expected productive hours for the 10 workers 4

1.2.2 Compute the annual Total Cost To Company (TCTC) for 10 workers 2

Total Marks for question 1.2 6

Question 3

Twelve production employees at the Namibia Biscuit Company (NBC) are paid a basic wage of
N$8.00 per hour plus overtime, as follows:

Monday to Friday up to 37 hours N$8.00 per hour (basic rate)

Monday to Friday over 37 hours Time plus a quarter
Saturdays Time plus a half
Sundays and Bank Holidays Double time

In addition to this they each receive a fixed bonus of N$10 each time weekly production exceeds
400 000 units. NBC company policy is to treat all bonuses and overtime premium as indirect
labour costs.

During the year ended 31 March 2024:

• 21 200 hours were worked at basic rate.

• 820 hours weekday overtime were worked.
• Every Saturday morning four people worked from 8am until 12 noon (assume a 52-week year).
• 6 employees came in one Sunday and worked from 10am until 4pm, cleaning up after a flood.
• The weekly bonus target was exceeded on seven occasions.

REQUIRED: MARKS
Calculate each of the following payroll costs for MBC for the year ended 31 March 2024:

3.1 Total basic pay 1

3.2 Total overtime 5.5

3.3 Total production bonuses paid 1.5

3.4 Total posted to the accounts as direct labour 2.5

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 3.5 Total posted to the accounts as indirect labour 3.5

TOTAL MARKS FOR QUESTION 3 14

Question 4

As a way of increasing productivity, a couple of companies have introduced various remuneration

incentives systems. For example, Moses who works for Windhoek Manufacturers CC is expected
to manufacture two desks per hour as the company’s set standard production requirement. A
basic rate of N$80 has been agreed upon per hour and half of the basic rate per desk
manufactured. He works eight hours a day, Monday to Friday. No provision for any overtime as
the company incentivizes all its artisans through the Rowan Bonus Scheme. He contributes 5%
and 7% of his basic wage towards his medical aid and pension fund, respectively. All employees
Windhoek Manufacturers CC employees are affiliated to the National Union of Namibian Workers
(NUNW) of which they contribute 1% of their basic wage while social security contribution is 0.90%
of basic wage. He is entitled to a fixed monthly transport allowance of N$800. A mandatory Pay
As You Earn (PAYE) of 18% based on his taxable income is applicable. According to Moses’
clock card for the week ended 21 April 2023, his weekly actual hours amounted to forty hours, of
which a total of eighty six desks have been manufactured.

REQUIRED: MARKS

Under normal production requirement, how many desks was Moses supposed to
4.1 0.5
manufacture per week?

Compute Moses’ Net wage payable for the week ended 21 April 2023 based on
4.2 10
hourly rate.

What is the cost implication for the employer if a piece work system is used instead?
4.3 1.5
Base your analysis on basic wage only.
TOTAL MARKS FOR QUESTION 4 12

Question 5

In 2022, following the post-pandemic closure of her employer’s business which was a family-
owned freight company in Swakopmund, Angela decided to put her skill in logistics and love for
cooking to work and open a small business in the form of a food truck.

Fork’ n Pork is operated from an old school bus parked near the beach and offers customers
breath-taking views as they enjoy their delights.

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 Angela does all the admin and logistics for the business, for this she pays herself a monthly
salary of N$ 16 000. She employs 3 additional workers a cook and two assistants who
assemble and serve the meals. These employees are paid using a system that combines the
meals served with a minimum living wage of N$ 1 000 per week.

The units of output recorded for the week ended 13 May 2023:

Monday Tuesday Wednesday Thursday Friday Saturday

Number of meals 300 295 250 150 280 140
Number of customers 120 125 110 95 130 80

Additionally, the cook is paid N$ 1.20 per meal and the servers split the number of customers in
half and get paid at a rate of N$ 1.80 each.

The pension fund contribution is 5% of basic pay for each employee and the employer matches
the employee’s contribution.

Assume each month is made up of four weeks.

REQUIRED: MARKS
Name the two types of remuneration systems combined in the scenario above 2
5.1
and explain why the company might opt for such a system.
Calculate the taxable income for each of the employees for the week ended 13 12
5.2
May 2023.
5.3 Distinguish the labor costs at Fork’ n Pork into direct and indirect components. 1
TOTAL MARKS FOR QUESTION 5 15

Question 6

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 Payslip
Zig zag Cc
No. 15 Du Toit Strt
Aranos,Namibia

Duties resumed : 2020-06-01 Employee name : Mark Cloete

Pay Period : 15-26 April 24 Designation : Machine technician

Earnings Amount Deductions Amount

Basic (living wage +hourly wage) Pension fund (8.5 %)
Overtime PAYE (18%)
Travel allowance (200 weekly) Medical 480
Social security (80 per month)

Total Earnings 0 Total Deductions

Net Pay

Employer Signature Employee Signature

SSC (Zig zag Cc is a fair opportunity employer and provides a weekly living wage of N$200 to all
their employees, additionally workers earn an hourly rate of N$30 for production time. The
company has a 5 day, 8 hours per day working week and overtime is paid at time and a third. The
employer contributes a percentage point less than the employee to the pension fund based on
basic salary, and a N$100 more for medical aid. A given month is 4 weeks.

The entity has observed a learning rate of 90% and the 1st unit took 2.5 hours.

REQUIRED: MARKS
What is the average time per unit for 63 units, use an index of learning
6.1 2
equal to -0.152? (keep two decimal places)
Using the average unit time calculated above, what is the average total time
6.2 2
for the units produced? (round your answer up to the nearest hour)
Using the information above, calculate the Net wage for Mark if the 63 units
6.3 13
were produced by him.
Clearly define Indirect labour and show the amounts of indirect labour
6.4 4
relating Marks’ psyroll.
TOTAL MARKS FOR QUESTION 6 20

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UNIT 4 – TUTORIAL 4

Question 1
The persistent COVID-19 situation in the country had led to companies to be more financial
prudent. For most manufacturing companies, for example, appropriate allocation of overhead
costs is key. T&T (Pty) Ltd (“T&T”) is a newly established manufacturing company. It
manufactures water pipes. In 2024, the company has budgeted to manufacture 60 000 water
pipes. During the same period, the company purchased raw materials at N$8 per unit from a local
supplier.

Due to COVID-19, T&T could only achieve 80% of its budgeted production for water pipes. Total
manufacturing overheads were budgeted at N$300 000. It is the company’s policy to absorb its
overhead costs on the basis of the number of water pipes produced. It took two hours to produce
one water pipe at an hourly rate of N$5. Total actual overhead costs amounted to N$250 000.
T&T adds a profit margin of 20% on sales, and 90% of the water pipes produced were sold during
the period under review. There was no opening or work in process at the beginning of 2024.

REQUIRED: Marks
1.1 Calculate an overhead allocation rate as per T&T practice. 2
1.2. Calculate over/(under) applied overheads. 3
1.3. Prepare a profit/loss statement to determine the gross profit/loss made during 13
the period under review.
1.4. How is the choice of allocation base made, name 2 techniques? 2
TOTAL MARKS FOR QUESTION 1 20

Question 2
Magnus Accounting services CC has three departments that use a single overhead absorption
rate, expressed as a percentage of wages cost. Below are budgeted and actual data for 2024,
together with information relating to client number 525 to whom audit and other accounting
services was provided in January 2024.

Budget: Direct wages Direct labour Production

hours overheads
Department
Book- N$ 250 000 4 000 N$ 1 200 000
keeping
Audit 1 000 000 5 000 300 000
Billing 250 000 3 000 750 000
Total: 1 500 000 12 000 2 250 000

Actual:
Book- N$ 300 000 4 800 N$ 1 300 000
keeping
Audit 800 000 4 500 280 000

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 Billing 300 000 3 500 800 000
Total: 1 400 000 11 800 2 380 000

Information relating to client number 525 for services provided during the period are as follows:

Service Direct wages Direct

materials labour
Department N$ N$ hours
Book- 1 200 1 500 200
keeping
Audit 600 12 000 400
Billing 100 1 000 100

Note that 33⅓% of the total service cost is added as a mark-up for invoicing purposes.

REQUIRED: MARKS
2.1. What is the current overhead absorption rate? 2
Using the rate obtained in 2.1 above, calculate the overhead charged to client number
2.2. 5½
525, and state the total service cost to be invoiced to the client.
Compute departmental overhead absorption rates, using labour cost as basis for Audit
2.3 6
department, and labour hours as basis for Book-keeping and Billing departments.
Use the departmental overhead absorption rates and calculate the overheads charged
2.4 2
to client number 525.
Show the over-/under-absorption, by department and in total, for the period using the
2.5 4½
rates calculated in 2.3 as basis for allocating the overheads.
TOTAL MARKS FOR QUESTION 2 20

Question
3.1 The production manager of Grim (Pty) Ltd has recently attended a management course where
the advantages of variance analysis were discussed. He feels such an analysis would assist in
solving problems of budgetary control that arose during the year. The following information relates
to the past year’s (year ending 31 May 2024) activities:

Actual manufacturing overheads N$175 000.00

Actual direct labour hours 25 000 hours

Budgeted manufacturing overheads N$125 000.00

Actual sales N$600 000.00

Budgeted direct labour hours 20 000 hours

Actual profit for the year N$185 000.00

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REQUIRED: MARKS

3.1.1 Calculate the predetermined overhead rate. 2

3.1.2 Calculate overheads over- or under-absorbed. 4

Total Mark for question 3.1 6

3.2. The overheads have been budgeted for and must be allocated to the production and service
departments.

Rent of factory building N$120 000.00

Electricity N$ 76 500.00

Insurance on machinery N$ 60 000.00

Protective clothing N$ 24 000.00

Secondary allocation is done on the basis of direct labour hours.

The following statistics is available:

Department A Department B Service Department

Number of employees 35 20 5

Floor space 500 m2 400 m2 100 m2

Value of machinery N$500 000.00 N$800 000.00 N$200 000.00

Kilowatt hours 400 400 50

Labour hours 400 225 95

REQUIRED: MARKS

3.2.1 Draw up an overhead statement and show the primary as well as the secondary 10
allocations.

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3.2.2 Calculate the absorption rate per department using labour hours as basis. 3

Total Mark for question 3.2 13

Question 4

Kombat Young Company (“KY” produces a many product lines. The company has been applying
the traditional absorption method to allocate common manufacturing overheads to different
product lines. Due to the recent pandemic, house hold incomes have dwindled and this has put
KY under pressure to review its prices. As such, the management of KY have approved switching
to an activity based costing method.
The company’s production activities, budgeted activity costs and cost drivers for next year are
given below:

Cost driver
Activity N$ Cost driver quantity
Set-up costs 200 000 No. of set-ups 800
Inspection/quality control 120 000 No. of quality tests 400
No. of purchase
Stores receiving 252 000 requisitions 1800

Machines are reset after each batch. Quality tests are carried out after every second batch.
The following budgeted information relates to one of KY’s product line called the Wiki for next
year.

Direct materials N$2.50 per unit

Direct labour 0.03 hours per unit @ N$18 per hour
Batch size 150 units
Number of purchase requisitions 80
Budgeted production 15 000 units

Required Marks
Calculate, using activity-based costing, the budgeted total production cost
6.1 12
per unit for product line Wiki.
Total marks for Question 6.1 12

Question 5
MTC NAM manufactures a variety of mobile phones, the information bellow relates to the two
types of mobile phones namely, MN10 and MN20. The MN10 sells for N$ 2 000 and MN20 sells
for N$4 500. Based on the following Statement for the year ended 31 March 2024, senior
management at MTC NAM would like to focus on producing MN20 only and phase out the MN10.
MTC NAM

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 Statement of profit or loss and other comprehensive income
For the financial year ended 31 March 2024
MN10 MN 20 Total
Revenues N$19 800 000 N$4 560 000 N$24 360 000
Cost of goods sold N$12 540 000 N$3 192 000 N$15 732 000
Gross margin N$7 260 000 N$1 368 000 N$8 628 000
Selling and administrative expense N$5 830 000 N$978 000 N$6 808 000
Operating income N$1 430 000 N$390 000 N$1 820 000
MN10 and MN20 produced and sold units 22 000 4 000 26 000
Net income per unit sold N$ 65 N$ 97.50
Budgeted machine hours (hours) 176 000 16 000 192 000
Actual machine hours (hours) 165 000 22 000 187 000
Primary unit costs for MN10 and MN20 are as follows:
MN10 MN20
Direct materials N$ 408 N$ 2 084
Direct manufacturing labour
MN10 (1.5 hours x N$50) N$ 75
MN20 (3.5 hours x N$50) N$ 175
Total primary cost per unit N$ 483 N$ 2 259

The company currently allocates manufacturing overhead costs to products using machine
hours as an allocation base. Budgeted total manufacturing overhead is N$8 256 000 and actual
total manufacturing overhead for the year ended 31 March 2024 amounted to N$9 325 000.

REQUIRED: MARKS
5.1 Compute the Pre-Determined Overhead allocation rate. 1.5
Calculate the total manufacturing cost for units of MN10 and MN20
5.2 3
produced.
5.3 Calculate the profit per unit of MN10 and MN20 produced and sold. 6
Calculate the over or under allocated overheads and based on your
5.4 answer indicate if the amount calculated should increase or decrease 4.5
cost of sales.
TOTAL MARKS FOR QUESTION 5 15

Question 6
ABC Company presently uses a traditional pre-determined overhead absorption rate for allocating
production overhead to its products based on direct labour hours. Total production overhead cost
is N$1 225 000 and it has been determined that four major activities contribute towards this cost
as follows:

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 The company is investigating the use of activity-based costing and has ascertained the following
production information in relation to its range of products:

Product A Product B Product C Total

No. of units produced 2 000 50 000 10 000 62 000
Direct Labour Hours used 10 000 140 000 25 000 175 000
No. of Set Ups 40 5 80 125
Inspections 40 - 35 75
Production Orders 50 25 50 125
Stock requisitions 400 30 320 750

REQUIRED: MARKS
Prepare a schedule showing the production overhead charged to Products
6.1 A, B and C per unit using the pre-determined overhead absorption rate used 3
by ABC Company, based on traditional costing methods.
Identify cost drivers, calculate activity based overhead absorption rates for
6.2 ABC Company, and show the revised production overhead charged to 12
products A, B and C per unit.
TOTAL MARKS FOR QUESTION 6 15

Question 7
Otjinene Ltd manufactures tents and camping chairs in three separate production departments
(A, B and C). There are three service departments called Stores, Canteen and Maintenance. For
the year to 30 June 2023, cost centre expenses and other relevant information are budgeted as
follows:

Departments
Total A B C Stores Canteen Maint.
Indirect Wages N$147 200 N$6 400 N$19 500 N$20 100 N$41 200 N$15 000 N$45 000
Indirect Material N$54 600 N$5 300 N$4 100 N$2 300 - N$18 700 N$24 200
Power N$31 700
Rent N$14 400
Floor Area (m²) 30000 8000 10000 7000 1500 2500 1000
Power usage (%) 100% 17% 38% 32% 3% 8% 2%
Direct labour
hours 112000 7000 48000 57000
Machine usage
hours 87000 2000 40000 45000
Value of raw
material issues
(%) 100% 62.50% 12.50% 12.50% - - 12.50%

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REQUIRED MARKS
You are required to prepare a statement calculating the overhead absorption
rates for each machine hour and each direct labour hour for each of the three
production units. You should use bases of apportionment and absorption
7.1 20
which you consider most appropriate, and the bases should be clearly
indicated in your statement.

TOTAL MARKS FOR QUESTION 7 20

Question 8.

Hardap (Pty) Ltd is an entity operating in the print and sign industry, they are thinking of adapting
a new system of allocatings their manufacturing overheads which are in the following categories.

Material requisitions Machine set up

Operational costs Quality control

You are an intern at the company and given your exposure to management accounting have
been asked to advise the company in this endeavor.

REQUIRED: Contextualize your answers as much as possible: MARKS

8.1. Identify the 7 steps followed whenever one uses Activity Based Costing. 7
8.2. Why is it that companies consider ABC more superior over the traditional costing 5
method?
TOTAL MARKS FOR QUESTION 8 12

Question 9

Gama Limited produces tents in three separate production departments and two service
departments. The principal process consists of cutting canvas material, sewing it and fitting it to
metallic and plastic poles. The tents range from small ones for camping to large ones for holding
outdoor events. The large tents are made on order basis with individual customer’s specification.
Details of manufacturing costs are as follows:
Factory overhead N$
Depreciation of machinery 455 000
Property rent & taxes 125 500
Electricity 126 650
Meals 155 000

Sewing& Quality Cleaning Maintenance

Cutting
Fitting Assurance
Number of employees 130 150 60 30 30
Labour hours 15 000 12 000 10 500 2 500 3 750
Floor area occupied (m²) 1 700 2 000 1 000 400 900
Value of machinery (N$) 2 550 000 600 000 650 000 80 000 120 000

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 Kilowatt power of 5 000 15 000
410 000 190 000 380 000
machinery
Machine hours 350 250 150

Additional information:
The expenses of the service departments are apportioned as follows:
Service departments Production departments (%) Service departments (%)
Cutting Sewing Quality Cleaning Maintenance
and Assurance
Fitting

Cleaning 20 40 30 - 10
Maintenance 40 20 20 20 -

REQUIRED: MARKS
9.1 Prepare an overhead analysis schedule for all departments 10
Compute the total overhead for the service departments, using the
9.2 3
simultaneous equation approach. (Work to two decimal places)
Apportion service department overheads directly to production departments
9.3 on the basis of the percentages given under additional information. 3
(Work to two decimal places, if applicable)
What is overhead over-recovery? State three ways overhead over or under-
9.4 4
recovery is to be accounted for.
TOTAL MARKS 20

Question 10
You have been appointed as the assistant-management accountant at The Feed Master Ltd, this
company specialises in animal food manufacturing. The following information relates to three
types of chicken food: Glow, Med and Flam. The output in units is respectively 160 bags, 120
bags and 100 bags. The products are produced in production runs of 20 units and sold in batches
of 5 units. The cost to manufacture is as follows:
Glow Med Flam
Direct material (per unit) N$140 90% of the cost of Glow N$120
Direct labour (per unit) N$228 N$221 N$214
Machine hours (per unit) 8 6 5

The production overhead costs for the period and the relevant cost drivers are as follows:
Factory rent N$5 000
Factory depreciation N$1 000
Supervision N$15 000

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 Machine set-up costs N$12 502 Number of production runs
Stores receiving N$17 400 Requisitions raised
Distribution costs N$34 086 Orders executed

Factory rent, factory depreciation and supervision costs are allocated based on machine hours.
The stores raised a total of 75 requisitions, of which 25 were for Glow. Flam required 20% more
requisitions than Glow.

REQUIRED: MARKS
10.1 Calculate the allocation Rate Per Machine Hour 2
10.2 Calculate the Total Cost for each product using Activity-Based Costing 8
System
TOTAL MARKS FOR QUESTION 10 10

Question 11

Agriculture Limited produces agricultural machinery parts and has classified the production
process into two sections - Assembly and Finishing, which are supported by the Service
Departments: Administration, Stores and Quality Control. The information relating their overheads
and number of employees is as follows:

Allocated overhead No. of

costs (N$) Employees
Production Departments
Assembly 35 000 20
Finishing 44 000 15
Service Departments
Administration 70 000 10
Stores 8 000 2
Quality Control 8 000 3

Additional information

• During the year, 50 000 machine hours were worked in the Assembly Dept. and 20 000
direct labour hours (at a cost of N$12 per hour) were worked in the Finishing Dept.
• Stores received 1 500 requisitions from Assembly and 1 000 from Finishing.
• Quality Control carried out 2 000 chargeable hours for Assembly and 1 000 for Finishing.
• One special piece of equipment, FARM100, was produced during the year. It took 100
machine hours of Assembly time and 55 direct labour hours in the finishing dept. Direct
costs were N$650.

27 | P a g e
 REQUIRED: MARKS
Calculate an appropriate absorption rate for:
(i) Assembly Dept.
11.1 (ii) Finishing Dept.
10
Hint: You need to perform a secondary apportionment
Calculate:
11.2 (i) The total factory cost of the special equipment, FARM100. 6
A sales price for FARM100 based on a 25% mark up.
TOTAL MARKS FOR QUESTION 11 16

Question 12

Keetmans Outdoor Machines Ltd produces three models chainsaw, namely the C250, C251 and
C252. The breakdown of fixed overhead expenses for the year ended 31 March 2024 is expected
as follows:

Cost pool Cost driver Quantity for the

period
Order processing Customer orders 6 600
Material purchasing Suppliers invoices 7 800
Parts administration Number of parts 565
Material handling Number of movements 1 800
Labour-related Labour hours 22 500

The following cost driver analysis is pertinent:

Annual cost driver utilisation per product
Cost driver C250 C251 C252
Customer orders 2 100 2 500 2 000
Suppliers invoices 3 000 2 000 2 800
Numbers of parts 165 185 215
Number of movements 600 600 600
Labours hours 8 250 7 800 6 450

Total estimated overheads for the year amounted to N$1 038 575, which can be divided
between the five cost pools as follows:
Order processing N$198 000
Material purchasing 429 000
Parts administration 36 725
Material handling 93 600
Labour related 281 250

REQUIRED: MARKS

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 The overhead absorption rate based on traditional costing methods using
12.1 4
labour hours as basis and the overheads allocated per product.
The overhead rates for each cost pool based on activity-based costing
12.2 5
principles.
Allocate the overhead cost to each product using activity-based costing
12.3 9
principles.
TOTAL MARKS FOR QUESTION 12 18

UNIT 5 – TUTORIAL 5

Question 1

1.1 Selma Upholstery CC (“SU”) is a company that manufactures and repairs couches. The
customers are allowed to choose the type of material that they prefer. As a result, SU uses a job
costing system.
For the 2024 financial year, SU has prepared the budget with the following details:

Details Amount (N$)

Factory rent 50 000
Selling and administration costs 20 000
Indirect labour 10 000
Administration salaries and wages 25 000
Indirect material 20 000
Sales commission 5 000
Depreciation of factory equipment 30 000
Factory maintenance 40 000
Direct material costs 300 000
Direct labour 150 000

In February 2024, a customer, Mr Xee brought in a couch for repair. The accountant at SU opened
a job for Mr X and labelled it Job No. SU140. He charged the job with the actual cost of material
of N$1 625 and direct labour of N$1 250.
It is SU’s policy to apply manufacturing overheads to production on the basis of direct labour cost
and charge 20% mark up on cost of production to arrive at selling price.
Job SU140 incurred actual manufacturing overheads of N$1 500.

Required Marks
1.1.1. Calculate the selling price of Job SU140 7
1.1.2. Determine if overheads were under or over allocated to this job 2
1.13. Explain why sometimes overheads are over or under allocated 2
Prepare the Work in process (WIP) control, finished goods control and cost
1.1.4. 5
of sales accounts for Job SU140
Total marks for Question 1.1 16

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Question 2

Company X is preparing a job cost estimate that will be used to provide a quote for a potential
customer. Estimated costs for the job are to be based on the following:

Direct materials N$2 893

Direct labour 210 hours at a basic rate of N$8·00 per hour

Direct production staff also receive a bonus each period. The bonus is paid on actual hours
worked at a rate per hour calculated using the following formula: {[(time allowed – time worked)
÷ time allowed] × basic rate per hour}

The bonus to be included currently in the costing of all jobs is based on the following estimates
for the period: Total time worked 3 400 labour hours, Total time allowed 4 000 labour hours

Production overheads Absorbed at 20% of prime cost (including labour bonus) + N$9·00 per direct
labour hour

Non-production overheads Absorbed at 25% of total production cost

Quoted prices are calculated to provide Company X with a net profit margin of 20% of sales

REQUIRED: MARKS

2.1.1 Calculate the total estimated PRODUCTION cost of the job. 8

2.1.2 Calculate the price that should be quoted for the job 6

Total Mark for question 2.1 14

Question 3
Windhoek Investments operates a job costing system. They serve medium sized businesses
within the Khomas and Omaheke regions with custom made cupboards. The following information
was obtained from the management of Windhoek Investment after a detailed costing analysis:

Overhead cost for the next year:

Setup costs N$ 90 000

Ordering costs N$ 50 000
Maintenance costs N$150 000
Electricity usage N$ 30 000

30 | P a g e
The cost drivers for these costs were planned as follows:

Number of Setups 400

Number of Orders 4 000
Machine hours 25 000
Kilowatt hours 75 000

Windhoek Investment completed two jobs during the year and the following information could be
extracted from the accounting records:

Job A100 Job A200

Direct materials N$1 200 N$600
Direct labour N$900 N$400
Number of setups 2 1
Number of orders 10 4
Machine hours 50 40
Kilowatt hours 60 25
Direct labour hours 40 20
Units completed 250 100
The company budgeted 5 000 direct labour hours for the year.

REQUIRED:
3.1 Determine the unit cost for each job using Activity Based Costing (ABC). 18
Round answers to two decimal places.
TOTAL MARKS 18

Question 4

The Ngoma Uniform Limited, NUL, situated in Katima Mulilo, Zambezi region uses job order
costing system. NUL manufactures all types of apparels that includes overalls and safety clothing.
Overalls are plain while safety clothing are overalls that have been strengthen to withstand the
harsh manufacturing conditions. NUL uses machine hours to apply overhead cost to jobs. At the
beginning of (1 April,2023) the company estimated that 150 000 machine hours would be worked
and N$900 000 overhead cost would be incurred during the year ending 31 March, 2024.
The balances of raw materials, work in process (WIP), and finished goods at the beginning of
2023/24 were as follows:
N$
Raw materials 40 000
Work in process 30 000
Finished goods 60 000

31 | P a g e
NUL recorded the following transactions during 2023/24:
i) Raw materials purchased on account, N$820 000. While raw materials were requisitioned for use
in production amounted to N$760 000 (N$720 000 direct materials and N$40 000 indirect
materials).
ii) Labour costs were as follows; Direct labour, N$150 000; indirect labour, N$220 000; sales
commission N$180 000; and administrative salaries, N$400 000.
iii) Sales travel costs of N$34 000 and advertising expenses amounting to N$360 000 were incurred
on account.
iv) Manufacturing overheads, already recorded were as follows; Utility costs incurred in the factory
was N$86 000; Depreciation for the year amounts to N$700 000 (N$560 000 relates to factory
and N$140 000 relates to administrative activities); Prepaid insurance expense during the year
totaled N$20 000 (N$14 000 relates to factory operations and N$6 000 relates to administrative
activities).
v) NUL worked 160 000 machine hours. Manufacturing overhead was applied to production.
vi) Goods completed during the year amounted to N$1 800 000.
vii) Total goods sold costing N$1 740 000 were sold to customers for N$3 000 000 on credit.
viii) Over or under recovery is charged to cost of goods sold.

32 | P a g e
 REQUIRED: MARKS
4.1 Journal entries to record the above information. 13.5
4.2 Prepare manufacturing overhead control account 4.5
TOTAL MARKS FOR QUESTION 4 18

Question 5

5.1 Tilo Investment CC produce a variety of Fast Moving Consumer Goods (FMCG). The
company uses a job costing system and keeps only one set of books for all cost and financial
transactions at the head office in Okahandja. On 1 June 2023, the corporation had an opening
inventory of work in process of N$50 000, made up as follows:

Job Direct Material Direct Labour Factory overheads

N$ N$ N$
Z10 12 000 5 000 3 000
Z11 9 000 9 000 2 000
Z12 3 000 4 000 3 000

During the month of June 2023, the following transactions took place:
Material requisitioned from stores for production:
Job Z11 N$15 000
Job Z12 N$ 8 000
Job Z13 N$19 000
Indirect material N$ 4 000

Wages paid:
Job Z10 N$ 5 000
Job Z11 N$ 2 000
Job Z12 N$10 000
Job Z13 N$ 8 000
Indirect labour N$ 6 000

The number of direct labour hours used for each job were:
Job Z10 550
Job Z11 270
Job Z12 1200
Job Z13 800

The factory overhead absorption rate used by Tilo Investments CC is N$7.50 per direct labour hours. At
the end of June 2023, Jobs Z10, Z11 and Z12 had been fully completed. Jobs Z10 and Z11 were dispatched
to their respective customers while Job Z12 was placed in the factory store-room. Factory overheads
amounting to N$15 000 were incurred during the month.

33 | P a g e
REQUIRED: MARKS

5.1.1 Prepare a job cost summary that shows the total costs for each job. 8

5.1.2 Determine the over/under applied overheads for the month of January 2023 4

TOTAL MARKS FOR QUESTION 5.1 10

5.2 Milo Ltd has supplied the following data concerning one of its contracts:

Contract price N$200 000

Cost incurred to date N$115 000
Estimated cost to complete the contract N$ 37 000
Value of work certified by architect N$120 000
Progress payments received from client N$100 000
Cost of work certified N$ 84 000

REQUIRED: Calculate what amount of profit to be taken on the contract as

MARKS
per;

5.2.1 The work certified method 3

5.2.2 The percentage completion method 3

TOTAL MARKS FOR QUESTION 5 18

Question 6

Boundary Wholesale CC (“BW CC”) is well known supplier of school uniforms to various schools
across Windhoek. BW CC uses a job costing system. Apart from ordinary uniforms, it
manufactures customized winter outfits made from karakul wool. It is the company’s policy to
absorb manufacturing overhead costs on the basis of direct labour cost. Should any over/under

34 | P a g e
applied overhead arise, is adjusted against the cost of goods sold. During the month of April 2023,
BW CC received an order from Windhoek High School, order number No.005; to provide them
with 320 winter outfits for their learners of which the information is provided below:

Budgeted information in respect of Order No.005:

Direct labour cost N$20/hour
Total manufacturing overhead costs N$ 14,400
Total production 320 units
Direct labour hours per finished winter outfit 1.5 hours
Direct material per finished winter outfit 1.5 kilograms

Additional information:

During the month of April 2023, a total of 320 winter outfits were manufactured and delivered at
a mark-up of 25%. The production department managed to stick to the budgeted time per finished
winter outfit. Accordingly, a 5% reduction in direct labour cost per hour was recorded. As for
material utilization, the production department has operated exactly as per the budgeted
production requirement. Materials were sourced from a local supplier at N$15.50 per kilogramme.
No further information is required other than what has been provided so far.

REQUIRED: MARKS
6.1 Calculate the overhead cost charged to Order No. 005. 5
6.2 Compute the production cost per unit in respect of the 320 winter outfits that 5
have been ordered by the Windhoek High School.
6.3 Determine the gross profit/ (loss) derived from the delivery of 320 winter outfits. 3
6.4 Suppose the actual overhead cost incurred is N$ 14,000. Determine the over/ 3
(under) applied overhead and explain how it would have affected the cost of
goods sold.
6.5 Why do companies estimate overhead costs? 1
6.6 What is the difference between job costing and process costing? Give one 3
example for each as a way of substantiating your answer.
TOTAL MARKS FOR QUESTION 6 20

Question 7

Kamenye Accountants and Auditors uses a job costing system. The following information is
available in respect of March 2024, the first month of business:
N$
1 Purchases of stationery 42 600
2 Materials were issued as follows:
- Direct materials
o Audit no. 1 16 950
o Audit no. 2 17 360
- Fuel and vehicle maintenance 4 360
3 The payroll was summarised as follows:

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 - Audit staff
o Audit no 1 (249 hrs) 12 450
o Audit no 2 (273 hrs) 13 650
- Mobile canteen staff and drivers 2 800
4 Overheads are applied on a labour hour basis. The budgeted
manufacturing overheads are N$27 000 per month and the budgeted
normal capacity is 600 labour hours per month.
5 Audit no 1 (6 client engagements) were completed during the month and 4
client engagements were charged to the client at 31 March 2024 for
N$10 000 per engagement.
6 The following additional expenditure was debited to the overheads control
account:
- Electricity and water 3 130
- Depreciation: Mini-bus and trailer 8 200
- Canteen expenses 8 000

REQUIRED: MARKS
7.1 Calculate the total cost of Audit no1 and the cost of the work in progress of
6
Audit no 2 at 31 March 2024.
7.2 Calculate the profit/(loss) on the sale of the 4 client engagements of Audit no
3
1.
7.3 Calculate the total manufacturing overheads over or under applied 6
TOTAL MARKS FOR QUESTION 7 15

UNIT 6 – TUTORIAL 6

QUESTION 1 (15 MARKS, 27 MINUTES)

Namib Mills has a production capacity of 200 000 bags of maize flour per year, normal capacity
usage is reckoned as 90%. Standard variable production costs are N$11 per bag. The fixed cost
is N$360 000 per year.

Variable selling costs are N$3 per bag, and fixed selling costs are N$270 000 per year, the selling
price per bag is N$20.

In the year just ended on the 30 August 2024, production was 160 000 bags. Accordingly, sales
were 150 000 bags. The closing inventory on the 30th August 2024 was 20 000 bags. The actual
variable production costs for the year were N$ 35 000 higher than the standard.

REQUIRED: MARKS
1.1 Calculate the profit for the year using absorption costing method 6.5
1.2 Calculate the profit for the year using marginal costing method 5.5

36 | P a g e
 1.3 Use your answers in 1.1 and 1.2 and reconciliation profits between the two 3
statements
TOTAL MARKS FOR QUESTION 1 15

QUESTION 2 (20 MARKS, 36 MINUTES)

OURGAME cc manufactures product XT3-1000 a component used in remote control toys.

Quarterly production capacity is 12 000 units. The following information relates to the budget for
the quarter ending 30th June 2024.
N$ N$
Sales:10 000 units @N$50 per unit 500 000
Production cost of 12 000 units 400 000
Materials 120 000
Labour 240 000
Variable overheads 60 000
Fixed overhead 60 000
480 000
Less closing inventory (80 000)
Operating profit 100 000

There was no opening inventory on 1st January 2024. The budgets for production, sales and
inventory for the next three quarters of the year are as follows. The selling price and the costs
remain the same as in the first quarter.
2nd Qtr 3rd Qtr 4th Qtr
Opening inventory ? ? 6 000
Production 14 000 13 000 10 000
Sales 11 000 12 000 14 000
Closing inventory ? 6 000 ?

REQUIRED: Marks
2.1. How many units of XT3-100 remained unsold at the end of first quarter? 2
How many units of XT3-100 were held in inventory at the beginning of the third
2.2. 2
quarter?

Prepare the statement of comprehensive incomes using both Absorption

2.3 14
costing and marginal costing techniques for the 3rd quarter 2024.

2.4 Reconcile the two operating profits in 2.3. 2

TOTAL MARKS FOR QUESTION 2 20

QUESTION 3 (18 MARKS, 32 MINUTES)

Given the impact of COVID-19 on economic activities, vocational training is considered as one of
the sectors that could reduce unemployment rate. Mr Alex is a resident of Windhoek who has
been running a small scale carpentry business since the beginning of 2023. His business is

37 | P a g e
specialized in manufacturing wooden chairs, wooden office cabinets, and wardrobes. All his
products are made out of timber that he buys from a local supplier at N$30 per kilogramme.

Though Mr Alex is naturally a business minded person, his financial knowledge is a point of
concern. Since his business is still at infant stage, it has only one carpenter who performs all
carpentry related tasks and earns N$25 per hour.

During November 2024, a request was received from Khomas Education Regional Office to
supply them with 200 class room wooden chairs. A chair required two kilograms of timber, and it
took three hours to manufacture. Exactly 200 chairs were manufactured, but the client could only
take 150 wooden chairs due to financial limitation. The chairs were delivered at N$250 each. The
remaining 50 wooden chairs were still in Mr Alex’s warehouse on 31 November 2024.

Total fixed manufacturing overhead cost amounted to N$5 000 during the month of November
2024. Fixed Selling and distribution costs amounted to N$4 000 during the same period. There
was no opening or work in progress on 1 November 2024.

REQUIRED: MARKS
3.1. Briefly explain in what way absorption costing is different from direct costing. 3
3.2. Between the two, which one is considered more appropriate for internal
reporting purposes, and why. 3
3.3. Prepare the statement of profit and loss under direct costing for the month
ended 31 November 2024. 10
3.4. Reconcile the profit/(loss) obtained in 3.3 to reflect the profit/(loss) as it would
have been under absorption costing. 2
TOTAL MARKS FOR QUESTION 3 18

QUESTION 4 (15 MARKS, 27 MINUTES)

On the1st October 2023, Mentoz Limited formed a wholly owned subsidiary company, BTech
(Proprietary) Limited for the sole purpose of manufacturing and selling a product called “EasyB”.
The board of directors of Mentoz Limited approved the following budget at normal capacity at that
date:

BTech (Pty) Ltd: Budget forecast for the Year ended 30 September 2024

TOTAL PER UNIT

N$ N$
Sales 1 010 000 10.10
Total costs 985 000 9.85
Direct materials 350 000 3.50
Variable production overheads 50 000 0.50
Direct labour 200 000 2.00
Fixed production overheads 180 000 1.80
Variable selling and administration costs 80 000 0.80
Fixed selling and administration cost 125 000 1.25

38 | P a g e
 Profit 25 000 0.25

The following information relates to the actual results for the year ended 30 September 2024:

Sales 90 000 units @ N$10.10

Opening inventory Nil
Closing inventory 8 000 units

The management accountant of BTech (Pty) Ltd had prepared a profit and loss statement on
30 September 2024 on a variable costing basis, which showed a loss. However, the profit
statement prepared on an absorption-costing basis at the same date showed that BTech (Pty)
Ltd had earned a profit.

The operations director of the company is reviewing both statements and is somewhat confused.
“You can never rely on the Accountants to give you the right figures”, he mutters angrily under his
breath as he reaches for his telephone.

REQUIRED: MARKS
Prepare income statements for BTech (Pty) Ltd for the year ended 30 September 2024 according
4.
to the two methods below. (Apply budgeted costs to actual sales).
4.1 Direct Costing Method 7
4.2 Absorption Costing Methods 8
TOTAL MARKS FOR QUESTION 4 15

QUESTION 5 (20 MARKS, 36 MINUTES)

The following information relates to the only product manufactured and sold by Wood plc.

N$ per unit
Selling price 180
Direct Material cost 55
Direct Labour 45
Variable Production Overhead 10
Variable Sales & Marketing Overhead 8

The following levels of activity took place over the first three months of the product’s life:

Month Sales Units Production Units

January 5 800 7 000
February 6 500 8 000
March 7 800 8 500

Additional information is as follows:

1. Budgeted fixed production overhead was N$500 000 per annum.

39 | P a g e
2. Actual fixed production overhead for the period was N$45 000 per month.
3. Sales and marketing overhead of N$35 000 per month and administration overhead of N$20
150 per month were in line with the budget for that period.
4. All fixed overhead costs are budgeted based on a projected volume of 80 000 units per year
and all costs are expected to be incurred at a constant rate throughout the year.
5. The business did not have any inventory on the 1st of January 2024.

REQUIRED: MARKS
5.1 Prepare a Profit & Loss Statement for the month of January and February using 14
Absorption costing method.
5.2 Prepare a Profit & Loss Statement for the month of January and February using Marginal 6
costing method.
TOTAL MARKS FOR QUESTION 5 20

QUESTION 6 (18 MARKS, 32 MINUTES)

The following statement is presented to you relating to the activities of ClassRep Cc for
November 2024

N$ N$
Sales 3,600,000
Less variable cost of goods sold: 1,800,000
Opening inventory 0
Add Variable cost of goods manufactured 2,000,000
Available for sale 2,000,000
Less closing inventory 200,000
Gross contribution margin 1,800,000
Less variable selling and administrative expenses 396,000
Contribution margin 1,404,000
Less fixed expenses: 1,200,000
Manufacturing ???
Selling and admin. 600,000

Net operating profit ???

Additional information:

- Fixed costs are absorbed according to units produced.

- Total variable cost per unit is N$200.
- Selling price is N$400 per unit.
- Material, labour and variable production cost is in the ratio 4:2:2, respectively.

REQUIRED: MARKS

40 | P a g e
 What is the difference between Absorption and Marginal costing and what do
6.1 3
we use them for?
6.2 How many units were produced, why do production and sales units differ? 4
Calculate a detailed production cost per unit based on Marginal and Absorption
6.3 4
costing, explain what causes the difference between these unit costs.
6.4 What is the unit selling and administration cost? 2

6.5 Prepare a reconciliation showing the profit according to Absorption costing. 4

6.6 When will profits/losses from both methods be the same? 1

TOTAL MARKS FOR QUESTION 6 18

QUESTION 7 (18 MARKS, 32 MINUTES)

Custom cable Cc manufactures a single product used in the animal feed business.
Variable production costs per unit are:

Direct material N$6.10

Direct Labour N$5.20
Variable overhead N$1.60

Fixed production overheads are budgeted at N$30 000 per month which are absorbed
according to production units budgeted at 4000 units.
Selling and Administration overheads are semi-variable in nature: variable costs are 5% of
sales.
Production and sales quantities over a two-month period are:
Production Sales
August 2024 4 000 3 500
September 2024 3 600 3 800
There is no finished goods inventory at the beginning of August 2024.

The company has prepared the following statement of comprehensive income using the
absorption costing method:

August 2024
N$ N$
Sales 98 000
Cost of sales (71 400)
Opening inventory -
Cost of production 81 600
Closing inventory* (10 200)
------------ -----------
Gross profit 26 600
Total selling and administration overhead 16 600
Variable selling and administration overhead
Fixed selling and administration overhead
-----------
Profit for the period 10 000
-----------

41 | P a g e
 REQUIRED: MARKS
7.1 Calculate the flow of units for the month of August and September 2024. 3.5
7.2 Calculate the unit cost according to marginal and absorption costing. 3.5
7.3 Calculate the Selling price of Custom cable Cc. 1.5
Prepare a statement of comprehensive income according to marginal
7.4 7.5
costing for the month of September 2024.
Prepre a reconciliation of profits to show the profit according to Absorption
7.5 2
costing in September 2024.
TOTAL MARKS FOR QUESTION 7 18

QUESTION 8 (20 MARKS, 36 MINUTES)

A company sold 56,000 units of its single product in a period at a price of N$12,50 per unit in its

first month of operations. Finished inventory was 4,000 units in the period and costs in the period

were:

Variable production: N$ 2.60 per unit

Variable selling: N$ 1.20 per unit

Fixed production: N$ 252,000

(Fixed production is allocated on the actual number of units produced)

Fixed administration N$ 144,000

REQUIRED: MARKS
Show the flow of units (Opening and closing inventory, Production and
8.1 5
Sales) as well as unit costs for quarter 1 and 2.
Prepare a statement of comprehensive income for quarter 2 using
8.2 6
absorption costing principles.
Use your answers in 8.1 and 8.2 to calculate the profit as per marginal
8.3 4
costing.(Only prepare a reconciliation of profits)
8.4 List 5 ways marginal cost may be used in managerial decision making 5

TOTAL MARKS FOR QUESTION 8 20

UNIT 7 – TUTORIAL 7

42 | P a g e
QUESTION 1 (20 MARKS, 36 MINUTES)
House & Home (“HH”) manufactures a single model of a commercial prefabricated wooden
cabinet. The basic cabinet components are cut out of wood in the cutting department and then
transferred to the assembly department. Materials are added at the beginning of the process in
both departments. Conversion costs are incurred evenly throughout the departments. Normal
wastage incurred in the cutting department amounts to 4% of the units that reach the wastage
point, and arise at the end of the process. The following information applies to the assembly
department for September 2024:
Units
Opening inventory of work in progress (20% completed) 70 000
Units introduced 150 000
Units transferred to assembly department 180 000
Closing inventory of work in progress (90% completed) 20 000

Opening Cost (N$)

Material 325 000
Conversion 128 000

Cost incurred in current period:

Material 560 000
Conversion 1 800 000

REQUIRED: MARKS
1.1. Prepare the process cost report for the cutting department using the FIFO method.
(Show all your workings, and where possible, round off your final answers to two
decimal places). 17

1.2. In what way is process costing differ from a job costing system? 1.5
1.3. Clearly explain whether you would agree with the following statements:
“Normal loss is controllable; hence it is shown as a separate line item in the 1.5
company’s financial statements. On the other hand, abnormal loss is uncontrollable,
thus it is allocated to other accounts”.

TOTAL MARKS 20

QUESTION 2 (20 MARKS, 36 MINUTES)

Inge Health Products (“IHP”) is a company that manufactures and supplies health personal
protective equipment (PPE). The company has been operating in a job costing environment since
their customers were vast and would require unique PPE tailor made to each customer’s specific
design. However due to the outbreak of Covid-19, the requirement of PPE has become standard
and hence IHP adopted a process costing system by March 2023.. It is IHP’s policy to value
inventory based on First In, First Out (FIFO).

The following information relates to the process of manufacturing PPE for the month of December
2024:

43 | P a g e
 Details Units Degree of completion Value (N$)
Previous process (Materials) - 100%
Materials added - 75%
Opening Work in process 1 000 N$15 950
Labour - 40%
Overheads - 20%
Cost incurred during the
period:
Previous process N$9 per
8 000
(Materials) unit
Materials added N$38 700
Labour N$26 400
Overhead N$19 800
Previous process (Materials) - 100%
Materials added - 50%
Closing work-in-process 2 000 ?
Labour - 40%
Overheads - 30%

Marks
Required: Sub-
Total
Total
2.1 Prepare the statement of equivalent units for December 2024 6 6
2.2 Calculate the cost per equivalent unit 3 9
Prepare the statement of evaluation/Cost reconciliation
2.3 statement/Cost allocation statement for the month of December 9 18
2024
2.4 Differentiate joint costing from process costing 2 20
Total 20

QUESTION 3 (20 MARKS, 36 MINUTES)

The following information was obtained from the books of Zambezi Chemicals Ltd, ZCL during
the period just ended 31 August 2024. ZCL uses the weighted average method for inventory
valuation.

Process 3
Units Materials Conversion
N$ N$
Opening inventory –WIP (Process 3) 1 600 10 800 9 800
Transfer from process 2 42 800 153 600
Transfer to process 4 37 000
Closing inventory-WIP(Process 3) 4 400

Opening work-in-process is 100% complete in terms of materials and 60% conversion while
closing inventory is 100% and 70% complete in terms of materials and conversion respectively.

44 | P a g e
Current period costs
Direct material added 158 080
Conversion 117 120

The normal loss in the process is 5% of units that reach the end of the process.

REQUIRED: MARKS
3.1 Calculate normal loss in units. 3
3.2 Quantity statement clearly showing physical units and equivalent units 8
3.3 Production cost statement clearly showing equivalent cost per unit 4.5
Calculate the cost for normal loss and show clearly how the cost is
3.4 4
allocated to the other units
3.5 Calculate the total production cost of goods transferred to process 4. 2
TOTAL MARKS 20

QUESTION 4 (20 MARKS, 36 MINUTES)

Windhoek Processors Ltd (“Windhoek Processors”) produces purple widgets, which require
processing through multiple production departments. The first department in the process is the
casting department, where the widgets are initially created. The widgets then move to the
trimming department for further work. During the month of September 2024, the casting
department incurred N$222,750 of direct material costs and N$141,050 of conversion costs
(comprised of direct labor and factory overhead).

Further information relating to the Casting department for September 2024 are as follows:

1 September 2024:
Work in progress: Material 10 000 units (100% complete) N$80,000
Conversion (60% complete) N$120,000

Units introduced in the current period 40 000

Units completed and transferred to the trimming department 30 000
Work in progress on 30 September 2024 14 000

Additional information:

• The Work-In-Progress on 30 September 2024 is 100% complete (material) and 80% complete
(conversion).
• Materials are added at the beginning of the process.
• Inspection for losses takes place when the process is 80% complete. Normal loss is 5% of the
units that reached the inspection point.
• It is the company’s policy to value its inventories on the basis of First-In-First-Out (FIFO).

REQUIRED: MARKS
4.1. State any two differences between FIFO method and Weighted Average Method 2
when it comes to their application in the Process costing system.

45 | P a g e
 [Link] a full process costing report inclusive of all the necessary schedules. 18
Clearly show all your workings in a coherent manner.
TOTAL MARKS FOR QUESTION 4 20

QUESTION 5 (25 MARKS, 45 MINUTES)

A company manufactures a single model of a commercial prefabricated wooden cabinet. The
basic cabinet components are cut out of wood in the cutting department and then transferred to
the assembly department. Materials are added at the beginning of the process in both
departments. Conversion costs are incurred evenly throughout the departments. Normal wastage
incurred in the cutting department amounts to 4% of the units that reach the wastage point and
inspection for any wastages is made at end of the process. The following information applies to
the assembly department for September 2024:
Units Cost
(N$)
Opening work in progress – Material 100% complete 70 000 325 000
-Conversion 20% complete 128 000
Units introduced 150 000
Units transferred to the assembly department 180 000
Closing inventory of work in progress – Material 100% complete 20 000
-Conversion 90% complete

Cost incurred in current period:

Material 560 000
Conversion 1 800 000

REQUIRED: MARKS
5.1 Prepare a quantity statement showing input, output and total equivalent units for the
cutting department using the AVCO method. (Show all your workings, and where 7.5
possible, round off your final answers to two decimal places).
5.2 Prepare a cost statement showing cost per equivalent unit and the value of the
normal loss to be allocated. 11

5.3 Prepare a cost allocation statement showing allocation of total costs to finished
goods, incomplete units and lost units. 4

5.4 In what way is process costing differs from a job costing system? 1
5.5 Clearly explain whether you would agree with the following statements:
“Normal loss is controllable; hence it is shown as a separate line item in the 1.5
company’s financial statements. On the other hand, abnormal loss is uncontrollable,
thus it is allocated to other accounts”.
TOTAL MARKS FOR QUESTION 5 25

QUESTION 6 (20 MARKS, 36 MINUTES)

Krest Limited, an agile Small and Medium-sized Enterprise (SME) based in Rundu, manufactures
the Exe electronic component for Mega PLC, a major vehicle components manufacturer
headquartered in Pretoria, South Africa. The production of this component involves a meticulous

46 | P a g e
three-stage process, culminating in packaging at the marketing department. Krest Limited
operates under a contractual agreement, requires them to deliver these components to Mega
PLC, with the latter employing a Just-In-Time (JIT) inventory management system.

The following information relates to the production of this part for the month ended August 31,
2024:
Work-in-progress on 1 August 2024 were 2 000 units as follows:
a) Materials: N$ 12 000,100% complete
b) Conversion: N$ 8 000,80% complete
Units introduced during the period: 10 000 units, with N$ 80 000 incurred on materials and
N$ 60 600 on conversion. Work-in-progress on 31 August 2024 was 1 000 units complete as
follows:
a) Materials: 100%
b) Conversion: 40%
Normal loss is estimated to be 5% of units that reached the inspection point
Additional information:

i. Materials are added at the beginning of the process.

ii. Losses are detected when units are 80% complete.
iii. Conversion costs are incurred evenly during the period.
iv. Losses have no scrap value.
v. The company uses the FIFO method in valuing its inventory.
vi. It is the policy of the apportion normal loss to fully complete units.

Required: Marks
6.1 Prepare a production cost statement for the period ended 31 August 2024. 20
TOTAL MARKS FOR QUESTION 6 20

QUESTION 7 (20 MARKS, 36 MINUTES)

Divundu Textile Limited, DTL, specializes in the production of high-quality textiles. The company
produces two main product-Local Fabrics and Export Fabrics. DTL employs a process-costing
system, with separate accounting for each product line. The production processes for both
product lines are almost identical, and normal losses account for 8 percent of the units introduced.
These losses occur prior to inspection point B, where units are 50 percent complete concerning
conversion costs but fully complete in terms of material usage. Conversion costs are distributed
evenly throughout the production process.
Local Export
Fabrics Fabrics
units units

47 | P a g e
 Opening WIP (50% and 80% complete, respectively) 6 000 5 200
Units introduced 60 000 80 000
Units completed 56 100 69 200
Closing WIP (90% and 40% complete, respectively) 3 000 8 000

The following costs relate to Local Fabrics

Direct Conversion
Materials costs
N$ N$
Opening WIP 137 500 68 750
Costs added during the period 2 016 000 1 097 250

REQUIRED: MARKS
7.1 Calculate the normal loss for Local fabrics and export fabrics. 3
Using FIFO method prepare quantity statements for Local fabrics and
7.2 9
export fabrics.
Based on data you have obtained prepare cost analysis statement for
7.3 8
local fabrics.
TOTAL MARKS FOR QUESTION 7 20

QUESTION 8 (20 MARKS, 36 MINUTES)

CookWare Enterprises is a manufacturing company based in the Omaheke region. The company
is renowned for manufacturing the highest quality cast iron pots. The pots are manufactured in a
single processing department. Its process-costing system has two direct material cost categories
(iron and paint) and one conversion cost pool. The following production information applies to
April 2024:

Units
Work in process, 1 April 2024 (80% complete) 8 500
Units started during April 52 300
Work in process, 30 April 2024 (40% complete) 11 200

Iron is introduced at the start of the production process, when the pots are physically cast. The
pots are painted when the production process is 70% complete. Conversion costs are added
evenly throughout the production process.

48 | P a g e
The following cost information was compiled from production reports for March and April 2024:

Work in process: 1 April 2024 N$1 320 000

Iron N$550 000
Paint N$290 000
Conversion Costs N$480 000

Additional Costs incurred during April 2024 N$4 356 800

Iron N$2 490 000
Paint N$454 000
Conversion Costs N$1 412 800

REQUIRED: MARKS
Summarise the physical flow of units through the production process for
8.1 2
April 2024
Calculate the equivalent units with regard to iron, paint and conversion cost
8.2 6
if a weighted average method is in use.
Calculate the cost of pots completed and transferred out of production and
8.3 12
work in process closing balance if a weighted average method is in use.
TOTAL MARKS FOR QUESTION 8 20

UNIT 8 – TUTORIAL 8

QUESTION 1 (15 MARKS, 27 MINUTES)

Jatropha Namibian Products (“JNP”) is a company that processes jatropha plant seeds into bio
diesel, bio kerosene, cosmetics and pesticides.

The JNP process uses jatropha seeds that are bought from farmers in the SADC region. Because
of the diversity of suppliers, the seeds delivered are not of the same quality. However production
of bio diesel and bio kerosene requires high quality jatropha seeds. This causes JNP to first do a
grading of all the seeds procured. The grading process results in a yield of 90% and poor quality
seeds at 5%. The rest are impurities that are considered normal losses. The grading process
costs N$7 000 per month and N$0.10 per kilo of jatropha seeds graded. The poor quality seeds
are processed further at a cost of N$2 per kilo into cosmetic paste that is sold for N$3 per kilo.

After the grading, the high quality seeds are then ground to prepare them for extraction of bio
diesel and bio kerosene. A liquefying chemical is applied to the ground seeds and the cost of this
chemical is N$20 per litre. Two litres of the chemical are required for every 1 000 kilos of ground
seeded cooking oil. Since this chemical is a dissolving chemical, it does not add to the weight of
the ground seeds. Other costs incurred in the processing department is fixed manufacturing
overheads of N$10 000 per month. The average output from the processing department is 40%
bio diesel and 60% bio kerosene. The bio diesel is sold as is to clients at N$5 per litre while the
bio kerosene must be processed further to make it super refined for use in jet engines.

49 | P a g e
The costs relating to the further processing of bio kerosene amount to N$0.30 per litre and the
output of the further processing is 90% of refined bio kerosene, which is sold at N$4.50 per litre.
10% of the output is a waste product that is sold at N$5 per litre as a pesticide after further
processing costs of N$3 per litre and fixed cost of N$9 977 per month has been incurred.

It is company policy to value inventory on the basis of First In, First Out (FIFO) and to deduct the
net realisable value (NRV) of by products from the joint productions costs. Joint costs are
allocated to joint products using the NRV method.

The following transpired in the month of September 2024:

500 000 kilo of jatropha seeds were purchased at N$0.50 per kilo.

The sales were as follows:

Bio-diesel 160 000 litre
Refined bio kerosene 260 000 litre
Cosmetic paste (by product) 20 000 litre
Pesticides (by product) 25 000 litre

Note: 1 kilo = 1 litre, therefore 1 000 kilos of input (jatropha seeds) yield 1 000 litres of
output.

The only opening inventory was 30 000 litres of bio kerosene valued at N$0.80 per litre. There
was no beginning or closing inventory work-in-process on hand.

Marks
REQUIRED: Sub-
Total
Total
Prepare a schedule showing the joints costs allocated to the joint
1.1 9 9
products for September 2024.
Determine the production cost per unit for each of the two joint
1.2 2 11
products for September 2024 (round to two decimal places).
Calculate the gross profit per joint product for September 2024 (round
1.3 4 15
total values to the nearest N$).
Total 15

QUESTION 2 (15 MARKS, 27 MINUTES)

During the past financial period, Windhoek Manufacturers (Pty) Ltd (“WM”) processed a raw
material that delivers three products, namely Aee, Bee and Cee. The products can be sold after
the split-off point or they can be processed further at additional costs. The organization prefers to
process all its output and sell only the final product.

There are no opening or closing inventories of raw materials or finished products. Details about
the production process are as follows:

50 | P a g e
 Aee Bee Cee
Joint manufacturing costs N$600 000
Output from the joint process (units) 20 000 10 000 30 000
Sales value at split-off point (per unit) N$35 N$50 N$42
Further processing costs (per unit) N$6 N$15 N$10
Sales value after further processing (per unit) N$55 N$75 N$63
NB: The company’s target gross profit percentage for product Aee is 60%.

REQUIRED: MARKS
2.1. Differentiate between a joint product and by-product. 2
Using the net realizable value (NRV), split the joint cost between the three products.
2.2. In your calculations, show the effect on the gross profit section of a Statement of 13
comprehensive income (for each product, indicate the cost per unit and gross profit
percentage).
TOTAL MARKS 15

QUESTION 3 (12 MARKS, 22 MINUTES)

Namib Mills makes use of sugarcane to manufacture Marathon Sugar, Paper Pulp and Molasses.
Molasses is the only by-product obtained in the preparation of sugar through repeated
crystallisation, the yield of molasses per tonne of sugarcane is 5%. Molasses is sold at N$5 per
kg and the cost of repeated crystallisation is N$0.50 per kg.

The company harvest a total of 9 tonnes of sugarcane in the current year, the company harvests
the exact amount of sugarcane planted. The amount of sugar extracted from a single tonne of
sugarcane amounts to 600kg and 350kg of paper pulp. The initial process of manufacturing
commences with the planting of cane setts (raw material) on the ground which costs N$11 111
per tonne. The next step involves fertilising the ground to make it conducive for production at a
cost of N$1 389 per bag enough to cover a single tonne cane setts. The company spend a total
of N$54 000 on irrigation of the plantation.

Workers are involved in the plantation and harvesting of the sugarcane, throughout the entire
process. Labourers are paid at a rate of N$107.5 per hour and the total numbers of hours worked
the year was 800 hours in total. A harvesting machine used during the harvesting season is rented
for an amount N$45 000 for the whole year.

Sugar produced from the sugarcane is sold for N$50 per kg and the paper pulp is sold for N$40
per kg. After harvesting, the sugar has to go through a milling process before it is ready to be
sold. The milling process costs N$20 000 in total for the year. In order for the pulp from the
sugarcane to be turned into paper pulp, it has to be mixed with bleach and chemicals before it

51 | P a g e
becomes a finished paper pulp product. The bleach and chemicals used for the year on the paper
pulp amounted to N$15 000 in total. Namib Mills reduces the joint costs by the net realizable value
of the by-product.

REQUIRED: MARKS
3. Use the following methods to show the allocation of the Joint Costs to the joint products
3.1 The Net Realizable Method 8.5
3.2 The Constant Gross Profit Percentage Method 3.5
TOTAL MARKS 12

QUESTION 4 (15 MARKS, 27 MINUTES)

Bunya Synthetics manufactures two joint products Elasta and Elastic in a common process. A
by-product ‘skrup’ is also produced. The following is data pertaining to the month of August
2024.

N$
Opening inventories Nil
Costs of processing:
Direct materials ?
Direct labour 250 000
Carriage inwards 15 000
Administration 150 000

One unit of Elasta requires 3kg of raw materials per unit while Elastic and Skrup requires 2.5kg
and 500g of raw materials per unit respectively. The main raw material is bought from a local
supplier at N$8 per kilogram. Production overheads are absorbed at the rate of 300% of direct
labour costs

Production and sales:

Production Sales
Units Units

Elasta X 8 000 7 000

Elastic Y 8 000 6 000

Skrup 1 000 1 000

The sales value per unit of Elasta, Elastic and skrup is N$200, N$300 and N$15. The saleable
value of the skrup is deducted from the common costs before apportioning costs to Elasta and
Elastic. The joint costs are apportioned between Elasta and Elastic on the basis of sales value

52 | P a g e
of production. The two products can be processed further into Elasta X and Elastic Y by
incurring N$500 000 which is apportioned on a ratio of 2:3 respectively. Elasta X is sold for
N$275 per unit and Elastic Y at N$350 per unit.

REQUIRED: MARKS
4.1 Calculate the common costs to be allocated to Elasta and Elastic. 5

Based on constant gross margin NRV determine common costs

4.2 10
allocated to Elasta and Elastic.
TOTAL MARKS 15

QUESTION 5 (15 MARKS, 27 MINUTES)

Rajah Manufacturing Company (RMC) uses a joint production process that produces three
products at the split off point. Joint costs during the month of October were N$720 000. The
company uses the sales a t split off method for allocating joints costs. October production
information was as follows:

Product
Alpha Beta Gamma
Units produced 2 500 5 000 7 500
Units sold 2 000 6 000 7 000
Sales prices:
- at the split off point N$100 N$80 N$20
- after further processing N$150 N$115 N$30
Costs to process after split off N$150 000 N$150 000 N$100 000

REQUIRED: MARKS
Compute the amount of joint costs allocated to each product assuming
5.1 that joint cost allocation is based on sales value at the split off point. 4.5
Assume all products are main products.
Assume that all the three products are main products and that they can
be sold at the split off point or processed further, whichever is
5.2 economically beneficial to the company. Compute the total cost of 4
product Beta in October if joint cost allocation is based on sales value at
split off.
Assume that product Gamma is treated as a by-product and that the
company accounts for the by-product at net realisable value as a
reduction of joint costs. Products Beta and Gamma must be processed
5.3 further before they can be sold. Compute the total cost of production of 6.5
products Alpha and Beta in October if joint cost allocations are based on
net realisable values (Round of final the answers to the nearest whole
number).
TOTAL MARKS FOR QUESTION 5 15

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QUESTION 6 (12 MARKS, 22 MINUTES)
The Windhoek Refinery CC is a manufacturer operating a production process that requires 800
kg of raw material point. A singular process yields two products, Aee and Bee at a rate of 45%
and 55% of input, respectively.

Aee sells for N$2 and Bee sells for N$1.25 per gram at split off point.

Material is acquired at N$0 .25 per gram and conversion is N$ 200 000.

The company is considering processing Aee further into Aee-Attractive and this will require 10
grams of Material up per unit which costs the same as point. The required conversion is
considered insignificant, and Aee-Attractive can sell for N$4.35 in the market.

REQUIRED: MARKS
6.1 Calculate the total joint cost. 3.5
6.2 Allocate joint costs according to the Sales value at split off point method. 9
6.3 Help Windhoek Refinery CC decide whether to process Aee further or not. 2.5
TOTAL MARKS AVAILABLE FOR QUESTION 6 15
TOTAL MAXIMUM MARKS FOR QUESTION 6 12

QUESTION 7 (15 MARKS, 27 MINUTES)

Tjandje Butchery has a manufacturing wing that makes three types of dried meat, which it supplies
to several customers in and around Windhoek. The basic ingredients for the three dried meat
products are first blended and processed together. The following information is available for the
month of October 2024:

Product Selling price Further processing Output

per kg (N$) costs per kg (N$)
Biltong 150.00 35.00 650
Chilli bytes 80.00 20.50 230
Droewors 95.00 25.00 120

Joint costs incurred were as follows:

Direct material 1 000 kgs of beef at N$28 per kg
Direct labour 400 direct labour hours at N$30 per hour
Factory overhead N$44 000

The butchery is launching a unique flavour of these tried and tested meat delicacies and so they
are keeping their prices very low. It is on this basis that Happy feelings Cc, a local event organizer
offers to buy 50kg of their chilli bytes for N$ 2 000, to be included in their gift basket.

54 | P a g e
 REQUIRED: MARKS
7.1 Calculate the joint costs to be accounted for. 3
7.2 Allocate joint costs using the Net Realizable Value method. 6
Calculate the Gross profit for Chilli bytes, clearly show the revenue earned
7.3 3
and related costs.
Should Tjandje accept the offer from Happy feelings Cc? Show your
7.4 3
calculations which include the price offered per unit.
TOTAL MARKS FOR QUESTION 7 15

QUESTION 8 (15 MARKS, 27 MINUTES)

Otjiwa Fontein is a large manufacturing company situated in Otavi in the Otjozondjupa Region of
Namibia. They farm maize in order to produce popcorn on a commercial scale, which is sold to
local and export markets.

The process starts with the harvesting of the maize from the lands. All the cobs are then subjected
to a process that separates the kernels from the leaves. Harvesting costs amount to N$750 per
ton and processing costs amount to N$150 000 per month. The moisture levels of the kernels are
then tested, as kernels with insufficient moisture (dry kernels) do not pop successfully. The dry
kernels are then crushed at a cost of N$1.50/kg and sold as sub-grade maize meal at N$4/kg.
The leaves are used by a community project for the weaving of mats and baskets, and are sold
to them at N$1/kg. Each ton of cobs processed yields 800kg kernels with sufficient moisture (good
kernels), 150kg dry kernels and 50kg leaves. During August 800 tons of maize were harvested.

55 | P a g e
The good kernels are then baked in industrial ovens at a rate of 200kg of input per hour until they
pop. The operating cost of the ovens is N$150 per hour and the fixed maintenance charge is
N$10 000 per month. Due to the evaporation of the moisture, 20% of the input mass is lost in the
baking process. Eighty percent (80%) of the popcorn retained is then used to produce lightly
salted popcorn, which is salted at N$0.50/kg and sold for N$8/kg.

The remaining 20% of the popcorn obtained from the baking process is used for the manufacture
of caramelised popcorn. The popcorn is subject to a process where caramel is added and
hardened, which leads to a slight mass gain due to the added ingredients. The cost of the
caramelising process is N$6/kg input. Each kilogram processed yields 1.2kg of caramelised
popcorn and one litre of molasses. The caramelised popcorn is sold at N$20/kg and the molasses
is sold as is at N$2/litre to farmers who use it as an additive in animal feeds.

The financial manager, Mr Yuri Coetzee, confirmed the following inventory policies of the
company:

“Inventory is valued at the lower of cost and net realisable value on a first-in-first-out basis (FIFO).
The net realisable values of by-products manufactured are deducted from the production costs of
joint products. Joint costs are allocated to joint products using the net realisable value method.”

The inventory movement report obtained provided the following information:

Sales
Leaves (by-product) 40 000kg
Sub-grade maize meal (by-product) 110 000kg
Lightly salted popcorn 430 000kg
Molasses (by-product) 95 000 litres
Caramelised popcorn 130 000kg

Opening inventory
Leaves (by-product) 0kg
Sub-grade maize meal (by-product) 0kg
Lightly salted popcorn 50 000kg (Valued at N$1.75/kg)
Molasses (by-product) 0 litres
Caramelised popcorn 17 120kg (Valued at N$18/kg)

There was no beginning or closing inventory work-in-process on hand.

REQUIRED: MARKS
Prepare a schedule showing the allocation of joint costs to the joint products
8.1 15
for the month.
TOTAL MARKS FOR QUESTION 8 15

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UNIT 9 – TUTORIAL 9

QUESTION 1 (20 MARKS, 36 MINUTES)

The management of BETA Limited developed the following static budget for one of its flagship
product, and estimated that 30,000 units would be sold during the month of August 2024.
Actual Static budget
Units sold 40 000 30 000

N$
Revenue 2 360 000 1 800 000
Cost of sales (1 732 000) (1 290 000)
Materials 760 000 600 000
Labour 632 000 450 000
Factory overhead 340 000 240 000

Gross profit 628 000 510 000

Period costs (348 800) (320 000)

Selling and distributions 128 800 120 000
Administrative expenses 220 000 200 000
Operating income 279 200 190 000

However, due to an expected increase in demand 40 000 units were sold. Since the sales
figures are higher than expected the management needs to analyse all variances and decide
whether a future revision of its budgets would be appropriate.
REQUIRED: Marks
Calculate the following:
(i) Material cost per unit
1.1. 3
(ii) Labour cost per unit
(iii) Selling price price per unit.

Based on the information provided to you, what would be the appropriate

1.2 recovery rate for factory overhead? 1

Prepare a flexible budgeted statement for comprehensive incomes for 40 000

units using the above information from a static budget for 30 000 units showing
1.3 16
clearly columns disclosing information for actual, flexed and variance.
Denote the variance with U for unfavourable and F for favourable.
20

QUESTION 2 (20 MARKS, 36 MINUTES)

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A company manufactures and supplies camping equipment that are made into two categories,
namely: Executive and Standard. Both types of camping equipment are made out of a water proof
plastic material that the company buys from a local supplier at N$ 15/kg for executive and N$
10/kg for standard. It takes three hours to manufacture an executive camping equipment and one
and half hour to manufacture a standard camping equipment. Four kilograms and two kilograms
of the water proof plastic materials are required for an executive and a standard camping
equipment, respectively. Employees are paid an hourly rate of N$ 12 and N$ 9.50, respectively.

The following information relates to the company’s expectations for December 2024
December 2024
Executive Standard
Desired monthly sales (units) 5 000 3 500
Selling price per camping equipment N$ 1 500 N$ 950
Finished goods inventory: 30 Nov 2024 1 200 900

Water Water
proof proof
plastic plastic
Inventory on 30 November 2024 (kilograms) 6 000 4 800
Inventory on 31 December 2024 (kilograms) 1 000 850

Given the importance of proper inventory management, the company maintains 14% of each
month’s sale as closing inventory for both executive and standard.

Prepare the following budgets for 31 December 2024: MARKS

2.1. Sales budget (in value) 2
2.2. Production budget (units) 4
2.3. Material purchase budget (quantity and value) 9
2.4. Labour budget (in value) 5
TOTAL MARKS 20

QUESTION 3 (20 MARKS, 36 MINUTES)

Kaume Enterprises (“KE”) is a business that sells sweets. The company buys the sweets from
producers and then packages them into small assorted packs. The business has gained
popularity due to its assorted sweets that customers are not able to get such mixes elsewhere.

KE is in the process of preparing budgets for the first quarter of 2024 and the following information
has been made available.

1. The cash balance on 1st January 2024 is expected to amount to N$14 000.
2. Budgeted monthly sales units for the first four months of 2024 are as follows:

Month Units (packets)

January 12 000
February 18 000
March 15 000
April 14 000

58 | P a g e
 3. KE will charge each packet of sweets for N$5 for January rising to N$7 in March 2024.
Sales are 30% cash and 70% credit. Credit sales are collected over a three-month period, 10% in
the month of sale, 60% in the month following the sale and 30% in the second month following the
sale. Total sales revenue in November 2024 and December 2024 amounts to N$45 000 and N$54
000 respectively.
4. Cost of sales is expected to be 75% of sales revenue each month.
5. The business maintains its closing inventory levels at 60% of the following month’s cost of sales.
Inventory at the beginning of January is expected to amount to N$27 000.
6. 65% of inventory purchased is paid for in the month of purchase and the remaining 35% is paid for
in the month following purchase. At the 31st December 2024 amounts owed for purchases were
N$13 800.
7. A loan of N$40 000 is expected to be received in January. The company will repay this loan evenly
over 20 months commencing in February.
8. A motor vehicle which cost N$8 000 when purchased second hand three years ago is expected to
be sold in March 2025 for N$3 300. The expenses associated with this sale are expected to be
N$300.
9. Equipment costing N$12 000 will be purchased in January and paid for in February. This equipment
will be depreciated on a straight-line basis over three years.
10. Operating expenses are paid as incurred. These have been estimated as follows:

January 12 800
February 18 900
March 14 00

The above figures include depreciation on existing assets (excluding planned

purchases/disposals detailed above) of N$2 000 per month.

Required Marks
Calculate the purchases requirement for each month from January 2025 to
3.1 6
March 2025.
3.2 Prepare a monthly cash budget for January, February and March 2025. 13
Outline any one potential benefits to KE from the preparation of the cash
3.3 1
budget
Total 20

QUESTION 4 (20 MARKS, 36 MINUTES)

Typo Limited specialises in novelty products and is considering manufacturing a new range of
items that coincide with major festivals. The range will initially comprise two products, Tic and Chi.
To assist with budgeting, Typo Limited has collected the following information for the month of
November 2024.

Projected Sales Quantity Selling price per item

Tic 4 000 N$18
Chi 2 000 N$50

59 | P a g e
 Production Requirements Cost per metre Tic Chi
Material Cer N$4 0.5 m 4m
Material Bac N$2 1m 3m

Finished Goods/Inventory Tic Chi

1 November 2024 200 0
30 November 2024 950 1 325

There is no opening or closing work in progress.

Materials Inventory Cer Bac

1 November 2024 6 000 m 20 000 m
30 November 2024 10 200 m 14 000 m

Labour and overhead costs

The standard direct labour required to produce each Tic unit is 30 minutes, and a Chi unit takes
1 (one) hour to produce. Labour is paid at N$10 per hour. Variable overheads (which will be
incurred evenly over the year) are projected at N$360 000 per annum, and these are to be
absorbed into production on the basis of direct labour hours.

REQUIRED:
MARKS
Prepare the following budget statements
4.1 Production Budget 4

4.2 Material Purchasing budget (include quantity and Value) 9

4.3 Labour budget 3

4.4 Variable overhead absorption budget 4

TOTAL MARKS 20

QUESTION 5 ______________ (15 MARKS, 27 MINUTES)

Make&Sell Cc is a start-up that was founded in 2023, since inception, the owner has tried to
manage the financial records. He has relied on limited training from the time he was a student at
Unam, over 5 years ago. As the entity grows, it has become more important to plan and control
the operations of the entity.

He has asked you as a management accounting student to assist and advise on the operational
budget. The following is an extract from the statement of Financial Position at the end of October
2024:

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 Statement of Financial Position
N$ N$ N$ N$
Cost Depreciation Balance
Share capital 160 Land and 100 000 - 100 000
000 buildings
Retained income 13 000 Machinery 50 000 20 000 30 000
Creditors 3 000 Furniture 10 000 4 000 6 000
Provision for 10 000 Vehicles 25 000 5 000 20 000
contingencies
185 000 29 000 156 000

Material X 2 500
Material Y 1 000
Finished 8 000
goods

Debtors 15 000
Bank 3 500
186 186 000
000

The entity manufactures and sells one product, the plan for the next financial year is total sales
of N$ 87 500, production units have a standard cost of:

N$
Material X 2 kg @ N$1.25 2.50
Material Y 4 ltrs @ N$0.25 1.00
Labour 2 hrs @ N$1.50 3.00
Overheads 2 hrs @ N$0.75 1.50
Total 8.00

The selling price is 1.75 times the standard cost and ending inventories are anticipated as
follows:

N$
Material X 3 000
Material Y 1 500
Finished goods 12 000

REQUIRED: MARKS
5.1 Prepare a sales budget for the new financial period. 2

5.2 What is the production budget? 3

5.3 Prepare a Material usage and purchase budget for Material X. 5

5.4 Prepare a Gross profit budget. 4

What is shown in and why do we prepare a material usage and purchase
5.5 1
budget?
TOTAL MARKS FOR QUESTION 5 15

61 | P a g e
QUESTION 6 (20 MARKS, 36 MINUTES)
Waltons Stationaries is a merchandising company that sells stationery and other school supplies
in Namibia. The company is planning its cash needs for 2024. In the past Waltons Stationaries
had to borrow money to support peak sales of back-to-school material, which occur during
January. The following has been provided to assist in preparing a cash budget for the period:

Budgeted monthly income statements for December 2023 to March 2024:

December January February March

N$ N$ N$ N$
Sales 60 000 90 000 70 000 65 000
Cost Sales 36 000 54 000 42 000 39 000
Gross Margin 24 000 36 000 28 000 26 000
Operating expenses
Selling expenses 10 800 16 200 12 040 10 545
Administrative Expenses 8 400 9 255 8 540 8 320
Net Income 4 800 10 545 7 420 7 135

Note the following additional information:

1. Administrative expenses include N$2 000 depreciation each month as well as a N$500 monthly
provision for accounting fees.

2. 20% of sales are cash sales. Credit sales are collected over a three-month period in the ratio of 10%
in the month of sale; 70% in the month following sale and 20% in the second month following sale.
October sales amounted to N$50 000, and November sales to N$56 000.

3. Purchases amount to 75% of the following month’s sales.

4. It is the company’s policy that 50% of a month’s inventory purchases are paid within the month of
purchases. The remaining 50% is paid the following month.

5. The cash balance on 30 November was N$25 000. The company must always maintain a cash balance
of at least N$5 000. Whenever the closing cash balance become less N$5 000, Waltons can borrow a
loan from FNB Namibia.

6. A loan of N$12 000 will be applied and expected to be received in of one of the months because the
closing cash balance is expected to be very low, the interest payable on loan is 15%per annum. The
repayment of the capital portion will only commence in March 2024.

7. Selling and administrative expenses are paid in the month in which they incur.

REQUIRED MARKS
Prepare a cash budget for Desert Design CC for the months of December 2023,
20
January 2024, and February 2024.

QUESTION 7 (20 MARKS, 36 MINUTES)

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Muhembo Technologies buys and sells a single product. Profit budgets (by month) for the 6-month
period from January 2024 are:

63 | P a g e
 January February March April May June
N$ N$ N$ N$ N$ N$
Sales 160 000 170 000 180 000 180 000 160 000 150 000
Cost of sales 88 000 93 500 99 000 99 000 88 000 82 500
Gross profit 72 000 76 500 81 000 81 000 72 000 67 500
Wages 34 000 34 000 34 000 34 000 34 000 34 000
Other costs 34 800 35 400 36 000 36 000 34 800 34 200

Net profit/(Loss) 3 200 7 100 11 000 11 000 3 200 (700)

Additional information

1. 10% of the sales are for cash; credit sales are paid for in the month after sale.
2. Purchases of the product are paid for in the month following purchase.
3. Inventory of the product (at cost) is expected to be:

N$
End January 2024 46 750
End February 2024 49 500
End March 2024 49 500
End April 2024 44 000
End May 2024 41 250
End June 2024 43 000

4. Wages are paid in the month incurred.

5. Depreciation of N$6 000 per month is included in ‘other costs’. Other costs (except depreciation)
are paid in the month following that in which they are incurred.
6. Capital expenditure of N$45 000 is forecast in May 2024.
7. Balances of current asset/liability items, at the end of December 2023, are expected to be:

N$
Inventory 44 000
Trade receivables 135 000
Bank (10 600)
Trade payables 113 450

8. A positive cash balance of N$11 750 is forecast for end March 2024.

REQUIRED: MARKS
7.1 Prepare a cash budget for each of the months April, May and June 2024. 15
Prepare a schedule itemising the net current assets expected at 31 May
7.2 5
2024.
TOTAL MARKS FOR QUESTION 7 20

QUESTION 8 (20 MARKS, 36 MINUTES)

64 | P a g e
The Flourish corporation is an entity producing a rare product for use in the manufacture of fiber
carbon, which is an advanced material used to create more efficient and cost-effective products
with unique properties that enable them to withstand extreme conditions and environments. The
product requires 2 types of raw material, Materials A and B.
The following details are planned for the last quarter of 2024:

October November December

Revenue projection (units) 8 000 10 925
Units produced 10 000

Sales are on a growth trajectory and there is a 15% increase in the units sold going into the last
month pf the year. Material A has opening inventory in November which is half of sales in October
while Material B’s opening inventory in November is a quarter of October sales.

The product manufactured’s standard is composed is as follows:

N$
Material A 2 kg N$4.50 9.00
Material B 4 kg N$2.50 10.00
Labor 2 hours N$5.00 10.00
Overheads 2 hours N$3.50 7.00
36.00

The company applies a mark-up of 25% on unit prime cost.

kg
Desired closing inventory:
- Material A 6 000
- Material B 3 000

The desired closing stock of finished goods is 20% of the following month’s sales.

REQUIRED: MARKS
8.1 How many units were sold in November 2024? 2
8.2 What is the selling price applicable? 2
8.3 Prepare a sales budget for the month of November 2024. 2
8.4 Caclulate the production budget for November 2024. 3.5
8.5 Calculate the raw material purchase budget for Material A. 5.5
8.6 Prepare a Gross profit budget. 5

TOTAL MARKS FOR QUESTION 8 20

UNIT 10 – TUTORIAL 10

QUESTION 1 (20 MARKS, 36 MINUTES)

65 | P a g e
Elso Ltd (“Elso”) manufactures large-scale solvents for factories and household cleaning. The
company uses standard costing system as a way of monitoring its cost. The following information
is available for Elso for the month of August 2024:
Budgeted Sales and production volume 600 barrels
Standard selling price per barrel N$1 750
Standard variable cost per barrel N$855

Actual Sales and production volume 620 barrels

Actual selling price per barrel N$1 690
Actual variable cost per barrel N$863

Additional information:
Standard cost card for one barrel of solvent
Direct materials 34 litres @ N$15 per litre
Direct labour 15 hours @ N$12,50 per hour
Variable overheads 15 hours @ N$10,50 per hour
NB: Overheads are absorbed on the basis of direct labour hours.

Actual cost and usage information

Total cost
Total usage (N$)
Direct materials 20 410 litres N$321 500
Direct labour 9 420 hours N$117 800
Variable overheads ? N$95 600

REQUIRED: Calculate the following variances and indicate whether the variance
obtained is favourable or unfavourable. MARKS
1.1. Material price variance 3
1.2. Material usage variance 3
1.3. Labour rate variance 3
1.4. Labour efficiency variance 3
1.5. Variable overheads expenditure variance 3
1.6. Variable overheads efficiency variance 3
1.7. Explain the possible causes of the type of variance obtained in 1.1 and 1.3? 2
TOTAL MARKS 20

QUESTION 2 (15 MARKS, 27 MINUTES)

Gravy Crafts (Pty) Ltd makes a Valentine gift hampers from various materials and have a standard
costing system of which this product standard cost card is below:

Input Cost per unit Total unit cost (N$)

Materials 3 kg N$30 kg 90.00

66 | P a g e
 Labour 1.5 hours N$28 per hour 42.00
Variable overheads 1.5 hours N$36 per hour 54.00
Total Variable costs 186.00

Based on the company’s experience in the tourism market in Windhoek, the company has
planned to produce and sell 8 500 hampers in February 2024 at a selling price of N$250 per
hamper. The fixed costs are budgeted at N$405 000.

The company uses a marginal costing system and recorded the following actual results for
February 2024:

• The selling price was 20% higher than the standard selling price. All the hampers produced were
sold and the Sales Revenue amounted to N$2 400 000.
• The Material Quantity Variance is 120 000 Favourable and the cost of material purchased and
used in the production was of N$510 000.
• The Labour Efficiency Variance was 61 600 Unfavourable and the Labour cost was N$412 000.
• Variable costs were N$512 600 and fixed costs were N$365 000.

REQUIRED: MARKS
Calculate the following;
2.1 The Actual hampers produced and sold 2
2.2 Selling Price Variance 3
2.3 Selling Quantity Variance 3
2.4 Material Price Variance 3
2.5 Labour Rate Variance 3
2.6 Explain what is standard costing. 1
TOTAL MARKS 15

QUESTION 3 (18 MARKS, 32 MINUTES)

Windhoek Upholstery Ltd produces and sells canvas for various types of motor vehicles. One
canvas is costed as follows:

Direct material 10 metres @ N$25

Direct labour 2 hours @ N$60 per hour
Variable manufacturing overheads – based on direct hours N$20 per hour
Fixed manufacturing overheads – based on normal production N$200 per unit

Each of the canvases sells for N$1 500. The variable overhead is incurred in direct proportion to
the direct labour hours worked. The unit rate for fixed production overhead is based on an
expected annual output of 18 000 canvases produced at an even rate throughout the year.
Assume that each calendar month is equal and that the budgeted sales volume for August 2024
was 1 500 units. The following were actual results recorded in August 2024.
Number of canvases produced and sold 1 350
Sales N$1 957 500
Production costs:
- Direct material 10 800 metres purchased and N$275 400
used

67 | P a g e
 - Direct labour 3 375 hours N$200 812.50
- Variable overheads N$65 812.50
- Fixed production
overhead N$275 000 (N$817 025)
-------------------
Gross profit N$1 140 475
-------------------

REQUIRED: MARKS
Calculate the following variances and indicate whether it is F or UF.
3.1. (i) Material price and (ii) quantity variance 6
3.2. (i) Labour rate and (ii) efficiency variance 6
3.3. (i) Variable expenditure and (ii) efficiency variance 6
TOTAL MARKS 18

QUESTION 4 (20 MARKS, 36 MINUTES)

Namibia Wood Products (“NWP”) is a company that manufacturers different types of furniture
products under a job costing environment. To ensure that the company meets its customer
expectations and the same time achieve operational efficiency, the company employs a standard
costing system. At the end of each period, variances are calculated and investigations are
undertaken to identify areas of improvement.

The following information relates to the traditional wooden work bench that NWP produces and
supplies to Small to Medium workshops in Namibia.

Variance calculated:

Month: November 2024

Variances N$
Material price variance 25 000 Unfavourable
Material usage 16 500 Favourable
Labour rate 40 000 Favourable
Labour efficiency 22 000 Unfavourable

Actual data for the month of November 2024 was as follows:

68 | P a g e
 Month: November 2024 N$ Units
Material costs 850 000 100 000 kilos
Labour costs 600 000 80 000 hours
Production volume 30 000 units

The actual and standard production volume for the month of November were the same.

Required: Marks
Prepare a standard cost sheet for the wooden work bench (Hint:
4.1 16
calculate the budgeted unit cost of one wooden bench)
Outline one possible reason for each of the labour and material
4.2 4
variances.
Total marks 20

QUESTION 5 (15 MARKS, 36 MINUTES)

Magnum Limited is a reputable company renowned for its diverse range of products catering to
internal house decoration and landscaping needs. The company produces and sells a popular
clay vase, meticulously crafted from clay sourced from the bed and banks of the Kavango River.
This vase has become a well-established choice in the market, valued for its quality and aesthetic
appeal, and is competitively priced at N$75 per unit. To ensure the consistent quality of their
products and maintain cost-effectiveness, Magnum Limited has implemented a standard costing
system.
At the beginning of 2024, Magnum Limited had the following standard cost sheet for a vase:

N$
Direct material 6 pounds @N$3.20 19.20
Direct labour 1.8 hrs @ N$ 9 16.20
Fixed overhead 1.8 hrs @ N$ 4 7.20
Variable overheads 1.8 hrs. @ N$1.50 2.70
Standard cost per unit 45.30

Magnum Limited computes its overhead rates using a budgeted volume of 144 000 units. The
half year actual results for the period ending 30 June 2024 are as follows:
Unit cost Total
Units produced 140 000
Materials purchased N$3.30 842 350 pounds
Materials used 842 000 pounds
Direct labour N$9.05 257 500 hours
Fixed overhead N$ 1 035 050
Variable overhead N$ 436 000

69 | P a g e
 REQUIRED: MARKS
5.1 Materials price and usage variances. 4
5.2 Labour rate and efficiency variances. 4
5.3 Variable overhead spending and efficiency variances. 4
5.4 Fixed overhead spending and volume variances 3
TOTAL MARKS FOR QUESTION 5 15

QUESTION 6 (18 MARKS, 32 MINUTES)

John is a graduate of the University of Namibia majored in entrepreneurship. After obtained a
loan from the Development Bank of Namibia, he started his own business which manufactures
filing cabinets using “material Gamma”. His company uses a standard costing system.

The following information relates to the company’s standard costs for the second quarter of 2024:

Budgeted figures: N$
Direct material 2 kilograms @ N$4 per kilogram 8.00
Direct labour 1.5 hours @ N$ 6 per hour 9.00
Variable manufacturing overheads 1.5 hours @ N$ 5 per hour 7.50
Fixed manufacturing overheads - 48 000

The company’s actual results were as follows:

• The cost figures for the second quarter of 2024 showed that 4 400 kilograms of material Gamma was
purchased at N$ 4.20 per kilogram and used in producing 2 000 filing cabinets.
• The wage records showed that total labour cost amounted to N$ 12 390.00. The actual hourly rate of
N$ 5.90 was paid to produce the 2 000 filing cabinets.
• Variable manufacturing overheads are deemed to vary with the number of hours worked. Total variable
manufacturing overheads for the period under review amounted to N$ 16 500.00.
• The fixed manufacturing overheads amounted to N$ 49 880.00.

REQUIRED: MARKS
Calculate the following variances, and in each case indicate whether the variance
is favourable or unfavourable:
6.1. Material price variance 3
6.2. Material quantity variance 3
6.3. Labour rate variance 3
6.4. Labour efficiency variance 3
6.5. Variable manufacturing overheads expenditure variance 3
6.6. Variable manufacturing overheads efficiency variance 2
6.7. Fixed manufacturing overheads expenditure variance 1
TOTAL MARKS FOR QUESTION 6 18

QUESTION 7 (15 MARKS, 27 MINUTES)

Omega Manufacturing Company operates a standard costing system. The following information
relates to the second quarter ending 31 August 2024.

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Standard cost card for the period (as the operation is mostly labour-intensive, overheads are
absorbed
using direct labour hours):
• Direct material per unit 20 kg at N$0,50 per kg
• Direct labour per unit 8 hours at N$2,80 per hour
• Variable manufacturing overheads 8 hours at N$0,30 per hour
• Fixed manufacturing overheads N$80 000 per quarter
• Production 10 000 units
The actual operating results for the period are as follows:
• Direct material purchased and issued to production 178 000 kg at N$0,54 per kg
• Total direct labour cost for the period 67 000 hours at N$2,88 per hour
• Variable overhead cost N$18 090
• Fixed overheads N$74 000
• Completed units 8 000
REQUIRED: MARKS
7.1 Material price variance 2
7.2 Material quantity variance 2.5
7.3 Labour rate variance 2
7.4 Labour efficiency variance 2.5
7.5 Variable overhead expenditure variance 2
7.6 Variable overhead efficiency variance 2
7.7 Fixed overhead expenditure variance 2
TOTAL MARKS FOR QUESTION 7 15

QUESTION 8 (15 MARKS, 27 MINUTES)

Ngoma Ltd uses a standard costing system in the production of its agricultural products. One of
its main products, a specialized type of organic fertilizer, is widely distributed and sells well across
the country. The company had budgeted sales and production of 20,000 bags of fertilizer, and
the standard cost per bag for the year ending 31 August 2024 is as follows:
N$
Direct material: 2m @ N$ 5 per metre 10.00
Direct labour: 3 hours @ N$ 12 per hour 36.00
Variable production overheads: 3 hours @ N$ 1 per hour 3.00
This fertilizer should sell for N$ 700 per bag.

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Total fixed costs for the period were budgeted at N$ 120,000, absorbed based on labour hours
worked.
The actual results were as follows:
(i) 80,000 kilograms of raw materials were purchased at a cost of N$ 196,000, producing 19,200 bags
of fertilizer.
(ii) No raw material inventory is held.
(iii) Labour worked for 61,500 hours, with a total labour cost of N$ 694,000.
(iv) Variable overheads during the period were N$ 67,000.
To boost sales, the selling price was reduced, resulting in the sale of 19,500 bags at an average
price of N$ 680 per bag. The total fixed costs incurred during the period amounted to N$ 127,000.

REQUIRED: MARKS
8.1 Fixed overhead expenditure variance and Fixed overhead volume variance 4.5
Variable overhead expenditure variance and Variable overhead volume
8.2 4.5
variance
8.3 Material price variance 2

8.4 Labour efficiency variance 2

8.5 Revenue variance 2

TOTAL MARKS FOR QUESTION 8 15

UNIT 11 – TUTORIAL 11

QUESTION 1 (10 MARKS, 18 MINUTES)

The following selected data relate to the Mexit Division of Swifty Enterprises (SE):
Sales revenue N$4,580,000
Uncontrollable fixed costs traceable to the division 1,360,000
Allocated corporate overhead 590,000
Controllable fixed costs traceable to the division 1,120,000
Variable costs 40%

REQUIRED: MARKS
1.1. Compute the following for the Mexit Division:
a. Segment contribution margin; 2
2
b. Controllable profit margin;
2
c. Segment profit margin.
1.2. When analyzing the Mexit Division as a resource investment for 1
SE, which of the three measures should be used? Why?
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 1.3. Assume that Mexit's management decided to construct a
segmented income statement that reflected the company's
2
five operating departments. Is it possible to trace all of the
N$1,120,000 in controllable fixed costs to the departments?
Explain briefly.
1.4. Which of the five dollar values stated in the body of the problem
would be utilized to calculate Swifty Enterprises' income 1
before taxes?
TOTAL MARKS 10

QUESTION 2 (10 MARKS, 18 MINUTES)

The following data pertain to Danlu Industries:

• Interest rate on debt capital 9%

• Cost of equity capital 12%
• Before-tax operating income N$35 million
• Market value of debt capital N$60 million
• Market value of equity capital N$120 million
• Total assets N$150 million
• Income tax rate 30%
• Total current liabilities N$15 million

REQUIRED: MARKS
2.1. Calculate Danlu's weighted-average cost of capital. 4
2.2. Calculate Danlu’s economic value added. 4
2.3. Briefly explain the meaning of economic value added. 2
TOTAL MARKS 10

QUESTION 3 (12 MARKS, 22 MINUTES)

Erongo West Limited has a lens division that is operated as an investment centre. The division is
operating at only 60% of capacity. The results for 2023 are:
Erongo West Limited
Lens Division
Performance report for the Year ended 31 December 2023
NAD (N$)
Sales 120 000 x N$100 12 000 000
Variable costs at N$40 4 800 000
Contribution margin 7 200 000
Direct fixed costs 3 000 000
Segment margin 4 200 000
Common costs for services from other divisions 1 800 000
Operating income 2 400 000

Capital employed 4 800 000

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The company’s minimum desired rate of return for residual income purposes is 15%.
For the financial year 2024, the Lens division expects its operations to be unchanged from 2023.
However, it has an opportunity to accept a special order from an outsider for 80 000 lenses at a
price of N$60 per lens. The order will not affect its regular sales and will require an additional
outlay of N$1 000 000 for direct fixed costs. Additional operating capital amounting to
N$1 500 000 will be employed.

REQUIRED: Marks
3.1. Calculate the Return on Investment (ROI) for the financial year 2023 1
3.2. Compute the residual income for the financial year 2023. 1
Calculate the following for the special order only:
4
3.3 i) Return on Investment
2
ii) Residual Income
Would you expect the manager of the lens division to accept the order if the
3.4 2
parameter used for evaluation were ROI? Why?
If the parameter used for evaluation changed to residual income, will your
3.5 2
answer in 6.4 change? Why?

TOTAL MARKS 12

QUESTION 4 (10 MARKS, 18 MINUTES)

This question is divided into two parts, 4.1. and 4.2, which are independent of each other. Please
answer the questions under each part in the context in which they have been asked.

4.1.

The Eyesec Data Division of Champs Company is treated as an investment center for
performance measurement purposes. Selected financial information for such division for the 4th
Quarter of 2024 is given below:

N$
Net Sales 200,000
Cost of Goods Sold 176,250
General and administration expenses 3,750
Average working capital 31,250
Average plant and equipment 68,750

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 Desired rate of return 15%

REQUIRED: MARKS
4.1.1. What was the Eyesec Data Division's Return On Investment for the 4 th Quarter of 3
2024?
4.1.2. What was the Eyesec Data Division's Residual Income for the 4th Quarter of 2024? 2
TOTAL MARKS FOR 4.1. 5

4.2.

Mr. Thomas is the manager of Care Corporation's Cute Care Division. Selma's performance as
an investment center manager is measured using the residual income method. Mr. Thomas’ goal
for the coming year (2025) is to earn N$100,000 in residual income with a 20% imputed interest
charge. Other figures for the upcoming year are as follows:

N$
Working capital 90,000
Plant and equipment 860,000
Costs and expenses 1,210,000

REQUIRED: MARKS
4.2.1. How much should revenues be next year to achieve the residual income target? 2.5
4.2.2. By what percent would the division's Return On Investment next year exceed the 2.5
desired rate of return?
TOTAL MARKS FOR 4.2. 5
GRAND TOTAL MARKS FOR QUESTION 4 10

QUESTION 5 (10 MARKS, 18 MINUTES)

Naute Irrigation Project in the outskirts of Keetmanshoop has three divisions in its local distillation
process with a cost of capital of 6% for the company. The following relates to the 2024 financial
year:
Divisions in the same company

Alpha Delta Omega

Revenues (N$) 800 000 600 000 (v)?

Income/Profit (N$) 120 000 (iii)? 80 000

Investment (N$) (i)? (iv)? 1 400 000

Income as a % of revenue (ii)? 20% 30%

ROI (%) 8 12 (vi)?

Management has decentralized the entity in the last few years and would like to evaluate each
divisional manager’s performance based on how their divisions did.

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 REQUIRED: MARKS

5.1 What is decentralization, how is it executed and what are its benefits? 2

5.2 Calculate the items labelled (i) to (vi) in the table above. 6

5.3 What is ROI and how can it be used? Based on it, which of these divisions is 2
performing best?

TOTAL MARKS FOR QUESTION 5 10

QUESTION 6 (12 MARKS, 22 MINUTES)

The following information has been extracted from the most recent financial records of Namibia
Material Handling (“NMH”):

2024 2023
N$000 N$000
Sales 33 750 24 750
Cost of sales (21 938) (16 830)
Wages (8 775) (6 188)
Utilities (675) (250)
Repairs (169) (325)
Selling and Administration expenses (506) 200

Total asset base 4 500 1 500

The company made a strategic decision to invest in additional assets in the current year (2024).

REQUIRED: MARKS
6.1 Calculate the operating profit or loss for each year. 4
6.2 Calculate the return on investment for each year. 2
Was the decision to invest additional assets in the company successful?
6.3 2
Explain.
Assuming an 8% cost of capital, calculate the residual income for each
6.4 4
year. Explain how this compares to your findings in part 6.3.
TOTAL MARKS FOR QUESTION 6 12

QUESTION 7 (12 MARKS, 22 MINUTES)

REQUIRED: MARKS
7.1 Define the following terms:
(i) Cost centre 2
(ii) Profit centre 2
(iii) Investment centre 2

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 State two financial performance measures that may be used to evaluate
7.2 2
investment centres.
Give the formula by which each of the two performance measures in (7.2)
7.3 2
above is calculated.
7.4 Give one advantage of each of the performance measures in (7.2) above. 2

TOTAL MARKS FOR QUESTION 7 12

QUESTION 8 (10 MARKS, 18 MINUTES)

8.1 Match the following definitions to the appropriate term by writing down the number of the
term and the letter which represents the appropriate definition. (0.5 marks each)

No. Terms Definitions

1 Decentralisation A. Defined unit or units of an enterprise for which the manager is
responsible for the activities, costs and possibly also the profit
and investments
2 Responsibility B. Is the income that a unit generates beyond the desired rate of
centre return
3 Cost centre C. Individual or group decisions result in meeting both personal /
group goals
4 Profit centre D. Managers are held responsible for the control of revenues that
originate there
5 Investment centre E. A financial performance measure based on accounting
information and is expressed as a percentage
6 Goal congruence F. Manager responsible to control income, costs and investments
7 Responsibility G. Represents a section or segments of a section for which
accounting managers are responsible for the costs that originate there
8 Revenue centre H. Managers are held responsible for the control of costs and
income.
9 Return on I. Division of a large enterprise into more controllable units
Investment
10 Residual Income j. Authority is decentralised (with responsibility) where,
performance is evaluated on accounting results

8.2 During the month of October 2024, a manger of a division presents the following results to
top management at their annual review:
- Profit before tax N$ 126 000
- Applicable tax rate 15%
- Controllable investment N$ 220 000
- Company-wide required rate of return 45%
REQUIRED: MARKS
Calculate the ROI if profit after tax is the suitable measure, comment on
8.2.1 2.5
the result.
Given the company-wide required rate of return, how much profit before
8.2.2 2.5
tax does the division need to meet the company’s expectation?

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TOTAL MARKS FOR QUESTION 8.2 5

TOTAL MARKS FOR QUESTION 8 10

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