Calculate Anne’s remuneration for 15 April 2022.

The normal wage of Anne is R200 per hour and her normal working day comprises 9 hours. The standard production time for each employee is 10 minutes per unit. On 15 April 2022, Anne’s production was 60 units. Using the Halsey bonus system, a bonus of 50% of the time saved is given to employees.

Calculate the total labour cost of Judith to Saffron Limited for 2021.


The following details relate to Judith, an employee of Saffron Limited, for 2021:

Monthly salary after deductions24 000
Employee’s monthly deductions16 000
Annual bonus36 000
Employer’s contribution to pension and medical aid funds per month3 600
Employee’s contribution to pension and medical aid funds per month3 000

Use the information provided below to calculate the following variances. In each case state whether the variance is favourable or unfavourable.
Material quantity variance (4 marks)
Labour efficiency variance (4 marks)
Variable manufacturing overheads expenditure variance (4 marks)
Regal Ltd uses the standard costing system. The standards and actual information for May 2022 for the only product that it manufactures are as follows:

Direct materials4kg @ R7 per kg
Direct labour5 hours @ R60 per hour
Variable manufacturing overheadsR12 per labour hour
Normal production12 000 units per month


Actual information for May 2022:
Direct materials used43 000kg @ R7.50 per kg
Direct labour56 000 hours @ R58 per hour
Variable manufacturing overheadsR649 600
Production11 000 units manufactured

QUESTION 2 (20 Marks)

Use the information provided below to answer the following questions:
2.1 Prepare the Income Statement of Clermont Manufacturers for August 2022 using the marginal costing method. (9 marks)
2.2 Prepare the Income Statement of Clermont Manufacturers for August 2022 using the absorption costing method. (8 marks)
2.3 Reconcile the profit calculated according to absorption costing (in question 2.2) with the profit calculated according to marginal costing (in question 2.1). (3 marks)

The following information relates to the only product produced by Clermont Manufacturers during August 2022:

Opening inventoryNil
Number of units manufactured5 000
Number of units sold4 500
Selling price per unitR300
Direct materials cost per unitR60
Direct labour cost per unitR40
Fixed manufacturing overheads costR90 000
Variable manufacturing overheads per unitR30
Fixed selling costR50 000
Fixed administrative costR60 000
Sales commissionR30 per unit

QUESTION 3 (20 Marks)

Use the information provided below to answer the following questions independently:
3.1 Calculate the margin of safety (expressed in units). (4 marks)
3.2 Use the marginal income ratio to determine the break-even value if the direct manufacturing costs are R10 per unit more than expected. (4 marks)
3.3 Calculate the total Marginal Income and Net Profit/Loss if the sales volume for 2023 is 20% below the budgeted quantity. (4 marks)
3.4 Calculate the number of units that must be sold to earn a net profit of R150 per unit. (4 marks)
3.5 Calculate the break-even quantity if the selling price is reduced by R50 per unit and the fixed manufacturing costs decrease by R22 000. (4 marks)

The Salmon Ltd manufactures and sells fishing rods for R600 each. The budgeted sales for 2023 are 22 000 rods and the costs are expected to be as follows:

Direct manufacturing costs per unitR200
Variable manufacturing overheads cost per unitR50
Variable administration costs per unitR40
Sales commission10% of sales
Fixed manufacturing costsR1 800 000
Fixed administration and selling costsR600 000

QUESTION 4 (20 Marks)

Use the information provided below to prepare the following for Protea Limited for January, February and
March 2023:
4.1 Debtors Collection Schedule (6 marks)
4.2 Cash Budget (14 marks)

Protea Limited is in the process of formulating plans for the first quarter of 2023.
1. The following sales figures show the growth expected:

2022DecemberR460 000
2023JanuaryR560 000
2023FebruaryR640 000
2023MarchR720 000

2. Forty percent (40%) of the sales is expected to be for cash and the balance is on credit.
3. Twenty percent (20%) of the credit sales is expected to be collected in the month of the sale and 75% in the month after the sale. The remaining 5% is usually written off as bad debts. Debtors who settle their
accounts in the month of the sale are entitled to a 5% discount.
4. The purchase of inventory is the company’s largest expenditure and the cost of these items equals 60% of the current month’s sales (excluding any discounts). Sixty percent (60%) of the purchases is for cash, to take advantage of a 10% discount. The balance is on credit and is paid in the month after the
5. Wages and fringe benefits equal 20% of the current month’s sales (excluding any discounts). Labour
costs are paid for in the month in which they are incurred.
6. Property taxes are estimated at R48 000 for 2023 and will be paid in four equal instalments in the last
month of each quarter.
7. General and administrative expenses are projected to be R420 000 for 2023 including depreciation of
R48 000. These expenses are incurred evenly throughout the year and are payable monthly.
8. Selling and distribution expenses amount to R24 000 for January 2023 and are expected to increase by 10% per month thereafter.
9. A provisional company tax payment will be made during January 2023 and it is calculated at a rate of
28% on half the estimated taxable income of R880 000 for the financial year.
10. The expected cash balance on 31 December 2022 is R100 000.

QUESTION 5 (20 Marks)

Use the information provided below to calculate the following. Where applicable, use the present value tables that appear after QUESTION 5.
5.1 Payback period of both machines (expressed in years, months and days.) (6 marks)
5.2 Accounting Rate of Return (on average investment) of Machine A (expressed to two decimal places).
(3 marks)
5.3 Net Present Value of both machines. (6 marks)
5.4 Internal Rate of Return of Machine B (expressed to two decimal places) using interpolation
if the net cash flows are R290 000 per year for four years. (5 marks)

Trump Limited intends purchasing a new machine and has the option of purchasing Machine A or Machine B. The following details apply:

 Machine AMachine B
Purchase priceR800 000R800 000
Expected useful life4 years4 years
Scrap value00
Depreciation per yearR200 000R200 000
Minimum required rate of return12%12%
Expected net profit:  
End of:Year 1R20 000R80 000
Year 2R60 000R80 000
Year 3R140 000R80 000
Year 4R120 000R80 000

Answers to Above Questions on Managment Accounting

Answer 1: The calculation of Anne’s remuneration for 15 April 2022 is performed as follows:


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