BACKGROUND:
ESKOM SOC Ltd.’s official website states:

The mandate of ESKOM SOC Ltd.:
To supply stable electricity in an efficient and stable manner, to contribute to lowering the cost of business in South Africa and enable economic growth.

The foundation of the business is the generation, transmission, distribution, and sale of electricity, supplemented with the construction of new power stations and network infrastructure.

REQUIRED:

On the following page, you are provided access to the link to the ESKOM SOC Ltd. 2022 annual audited financial statements as well as the entity’s official website.

Utilise these sources and supplement them with your own research to perform the following tasks:

1. Perform a detailed analysis in which you identify and explain all the various costs that one can expect to be incurred by ESKOM SOC Ltd. (operational and other). Classify these costs into the following categories and motivate the classification:
• Direct material
• Direct labour
• Variable manufacturing overheads
• Fixed manufacturing overheads
• Variable non-manufacturing overheads
• Fixed non-manufacturing overheads

(12 marks)

2. Perform a detailed analysis in which you:
• Identify and explain environmental costs that one can expect to be incurred by ESKOM SOC Ltd.
• Use the quality cost framework to classify the environmental costs into their different categories.
(6 marks)

3. Based on all that you have learned about ESKOM SOC Ltd. through the above analysis and research:
• Propose the pricing strategy which will be best suited for ESKOM SOC Ltd.’s business and market.
• Motivate why the proposed pricing strategy will suit ESKOM SOC Ltd. the best.
(4 marks) Structure, bibliography and referencing: (3 marks)
Tabulate all answers as far as possible, e.g.: cost classifications, environmental costs, and pricing strategy.

Answers to Above Questions on Management Accounting

Answer 1: The various costs that Eskom Limited is expected to incur are classified as follows:
1) direct material cost: Direct material cost is that type of cost that is directly involved with the production of goods and services. As in case of Eskom Limited, the direct material cost includes the cost of natural gas, coal, uranium and other resources that are utilised by the company in producing electricity.