AUE2602 - Corporate Governance In Accountancy (AUE2602)
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AUE2602 EXAM PACK
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Course
AUE2602 - Corporate Governance In Accountancy (AUE2602)
Institution
University Of South Africa (Unisa)
This exam pack contains • Exam question papers • Memorandums • Summary of the course material • This Exam Pack contains • Exam question papers • Memorandums • Summary of the course material • Additional notes.
AUE2602 - Corporate Governance In Accountancy (AUE2602)
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, 1
Question 1 (35 marks) (42 minutes)
1. Mabindu Best Beds (Pty) Ltd
Actual results for the year ended 30 June 2016
Loft Platinum
Sales (2 000 x 400) 800 000
(2 500 x 1 050) 2 625 000
Less variable costs (284 000) (826 875)
Opening inventory (calc 2) 46 500 94 500
Variable production costs (calc 3) 125 000 292 500
Goods available for sale 171 500 387 000
Closing inventory (calc 4) (73 500) (48 375)
Variable cost of sales 98 000 338 625
Variable selling and admin costs (calc 5) 186 000 488 250
Contribution 516 000 1 798 125
Less Fixed costs (242 650) (800 600)
Production costs (given) 77 500 140 000
Selling and admin costs (calc 6) 165 150 660 600
Net profit 273 350 997 525
Calculations
1. Units Loft Platinum Total
O/S 200 300 500
Prod 500 900 1 400
Avail for sale 700 1 200 1 900
Sales (400) (1 050) (1 450)
C/S 300 150 450
2. Opening inventory Loft Platinum
Total costs 72 500 133 500
Fixed OH: 200 x R130 (26 000)
300 x R130 (39 000)
Variable manu costs 46 500 94 500
Loft Platinum
3. Variable costs (500 units) (900 units)
Dir Mat (200 x 500) 100 000
(250 x 900) 225 000
Dir Lab (30/60 x 100 x 500) 25 000
(45/60 x 100 x 900) 67 500
Total Var prod costs 125 000 292 500
2. A company would prefer the direct costing method because only variable manufacturing
costs (direct material + direct labour + variable manufacturing overheads) are included in
inventory valuation, which is of particular importance to management (we use variable
information for decision making purposes)
Variable selling and distribution costs are added to arrive at marginal income.
Variable non-manufacturing costs, as well as ALL fixed costs, will be treated as period costs.
This helps to overcome the problem of allocating fixed costs.
c) i) Over/under applied overheads
Actual fixed overheads 217 500
Applied overheads (R150 x 1 400 units) 210 000
Under applied (7 500)
ii) Dr Cost of sales 7 500
Cr Manufacturing overheads 7 500
OR
c) i) Over/under applied overheads
Actual fixed overheads 217 500
Applied overheads (652 500 - 125 000 - 292 500) 235 000
Over applied 17 500
Dir mat (100 000 + 225 000) 325 000
Dir lab (25 000 + 67 500) 92 500
OH (Applied OH) bal fig) (235 000/1 400 = 167.86 not 150) 235 000
652 500
ii) Dr Manufacturing overheads 17 500
Cr Cost of sales 17 500
, 3
3. The opening inventory is valued on the absorption costing system as it contains the applied
fixed overheads at the recovery rate of R130 per unit, whereas the direct method would only
include the variable costs (materials, labour and overheads).
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