(a)(i) Calculate the actual kilogram of almond flour used by the Hatfield Bakery during April 2018.
Marks
(6)
Step 1 – calculate the actual input:
Demand in total 49 500 (twice as many units sold in Mar to Aug than Sep to Feb)
Mar to Aug 33 000 (49 500 / 3x^ = 16 500); (16 500 x 2^) (½)R/W
(1) R/W
Sep to Feb 16 500
For the period of April units produced:
33 000 / 6months^ = 5500 macaroons / 25per batch^ = 220 batches (½)R/W
(1) R/W
Or 49 500 = (6x)(2) + (6x) ~~~~ x = 2750 Thus, x2 = 5 500 in winter /25 = 220 batches (3) R/W
Step 2 – calculate std price (only focus on almond flour)
Almond flour uses 750g almond flour at a cost of R200 per kilogram per batch
Cost per batch R200 ^ x 750g/1000g ^ = R150per batch OR R6 per macaroon OR R200 (1) (1) R/W
Step 3 – determine the std mix for almond flour
Per the information 750g of almond flour and 500g of cake flour is used. THUS 750g/1250g is the std mix (½) R/W
for almond flour
Step 4 – calculate the actual mix for almond flour
Total kilogram flour required per batch = 220 batches (Step1) (MT) x 1kg = 220kg (½) R/W
Step 5 – calculate actual usage for almond flour
R6 600 variance^ (R/W)/ R200^ (MT) = 33kg (1)
– the recipe used 33kg less almond flour than expected.
Standard almond flour expected: 220kg x 750/1250^ = 132kg (½) MT
Actual almond flour used: 132kg – 33kg = 99kg^ (½) MT
Max 6 marks [6]
(a)(ii) Comment on the material variance calculated in question (a) (i) and the considerations the Hatfield Marks
bakery needs to make in response to this variance. (2)
Less amount of almond flour should be ordered as can be seen from the calculation in (a)(i), almond (1)
flour decreased from 750g per batch to 400g per batch due to a recipe change to decrease the cost of
total flour.
- Standard cost chart needs to be updated to include the change in recipe to ensure the accuracy of (1)
the calculation of the mix variance in future.
More cake flour should be ordered, as we noted that out of the 1kg actual input per batch 400g related (1)
to almond flour, which indicates that cake flour, is 600g. This is more than the standard mix of 500g.
Before making any further changes to their order quantities of flour, the Hatfield bakery should first consider (1)
whether the change in the recipe was successful i.e. consider if the same amount of output was obtained
which would have been obtained under the standard mix and see if the sales if these macaroons were just
good (no change in quality of taste)
Available 4 marks, max 2 marks [2]
b) Draft a memo to the financial director of the MP detailing what the Material division needs to consider Marks
when ordering their raw materials (flour, eggs and sugar) for distribution to all bakeries during May 2018.
(3)
No additional calculations required for (b). (1)
Communication: Layout and structure
Communication: Layout and structure (1)
The following recommendation should be made to MP:
Materials
- Materials division needs to consider if the recipe change that occurred at the Hatfield bakery will take
place at all bakeries as this will influence the amount of almond and cake flour sourced locally and (1)
imported.
- Consider the time and cost of importing cake flour from France. As petrol prices are increasing this (1)
might have an effect on the currency and increased prices of cake flour.
The new supplier obtained for eggs do not have the desired quality needed. The new supplier’s eggs are (1)
too small in size and lead to increase consumption of eggs per macaroon batch. Therefore a new supplier
needs to be obtained.
- For all the eggs recalled money would be received back therefore the cost of these eggs are not lost. (½)
- Eggs had to be replaced at a premium, therefore if the Listeriosis threat continues a more affordable (1)
supplier would need to be obtained.
- Consider whether all eggs that were received from the previous supplier (Listeriosis threat) has been (1)
recalled and no bakeries received these damaged eggs.
The price of petrol has increased due to the Dollar/Rand exchange rate leading to the delivery costs of (1)
supplies becoming more expensing as MP sources its sugar from KZN.
- MP should consider getting a cheaper supplier to accommodate for the increase in costs but need to (1)
consider the quality of the supplies. (can be under general as well)
- MP should consider increasing the amount of materials ordered at one time to determine if delivery (1)
costs decrease.
Max two marks awarded for the following:
- Getting reliable suppliers to supply quality raw material (links to the incorrect eggs trigger) (1)
- Consider ordering process – customer demand (how much to order), the safety stock, ordering (1)
costs, storage costs and re-ordering point (taking lead time into account if stock is imported or
being delivered from KZN)
- Considering getting cheaper suppliers (links with increase in delivery costs), and quantity discount (1)
with orders.
- Consider perishability of products such as eggs and flour and the timing of the order as well as (1)
lead time of the orders.
Available 12 marks, Max 4 marks [4]
(c) Calculate the idle labour variance. Marks
(9)
Calculation
Step 1 – std tariff rate calculation
Clock hour rate – 8 clock hours at R25 per hour = R200 per day
Work hour rate – 7.5 work hours (8 x [1-0.0625]) at R26.67 per hour (R200/7.5) (1)R/W
Step 2 – actual work hours work
Students had to consider the learning curve factor for the new artisans to calculate the actual work hours
for April 2018.
LC percentage: [(12 + 11.5)/2] ^ / 12^ = 0.9791667 (½) R/W
(1) R/W
LC was applied in batches of 5 since March 2018 up until 240 batches were made cumulatively (4 artisans
@ 60 batches). As calculated in (a)(i) 220 batches macaroons were produced per month in winter.
March 1 to 220 (55 batches per artisan) (½) MT
April 221 to 440 (20 batches in April will still undergo a LC effect and from batch 241 (remaining 200 (½) R/W
batches will have no LC effect)
Convert the batches in groupings of 5 batches (for one employee):
220 batches = 55 batches per employee (220/4) = 11 learning effects (groupings of 5 batches) (½)R/W
240 batches = 60 batches per employee (240/4) = 12 learning effects (groupings of 5 batches)
Half mark awarded if students calculated the remaining batches in April correctly that would not have a LC
effect.
LC: Yₓ = a • xᵇ
Yₓ = 12 x 11[log(0.9791667)/(log(2)] (½) MT
Yₓ = 11.157076 x 11 = 122.73 hours (½) MT
LC: Yₓ = a • xᵇ
Yₓ = 12 x12[log(0.9791667)/(log(2)] (½) MT
Yₓ = 11.1276 x 12 = 133.53 hours (½) MT
Total time first 20 batches in April: [133.53x4 – 122.73x4] 43.20 (½) R/W
Total time for remaining 200 batches 5 = 43.2 x 200 / 5 /4 432 (½) MT
Total work hours for April 475.2 (½) MT
Step 3 – actual clock hours clocked (expected work hours)
4 artisans x 20 working days ^x 7.5 work hours per day^ = 600 work hours OR 4 artisans x 20 working (½) R/W
days ^x 8 clock hours per day^ = 640 clock hours (1) R/W
IDLE variance =
(600 expected work hours – 475.2 actual work hours) ^ x R26.67^ = R3 328 OR (½) MT
(640 actual clock hours x R25) ^ – (475.2 actual work hours x R26.67)^= R3327 (1) MT
Max 9 marks [9]
(d)Critically analyse the fixed overhead volume variance for the Hatfield Bakery for April 2018. Marks
(4)
Expenditure variance
The R1000 variance is favourable as Hatfield bakery spent less than budgeted. [48 000^ x R10 /12m = (1)R/W
R40 000] versus R39 000^ given (½) R/W
The variance was calculated correctly but incorrectly stated as unfavourable.^ (½)M/T
Volume variance
Budgeted cost for a normal month R40 000 (48 000 x R10 / 12m) Mark given
Actual output x std rate per unit R55 000 (220batches x 25macaroons^ x R10^) (1) R/W
The junior accountant did not note a favourable volume variance of R15 000. (1) MT
[4]