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Hello please may you assist with the above questions we have attempted to answer but we are not sure if the answers are correct

attachment_08062019.png

Macro Hardware Limited manufactures two types of products, a laptop and an ipod and sells them in a
very competitive market. Both products are funky light-weight products that are designed for the 15 to
25 year old age group market. Due to the popularity of their products, Macro Hardware Limited is
Central to modern business
considering expanding into different target markets during the next financial year that commences on 1
July 2019. However management wish to first evaluate the risk and expected profitability of the existing
target market for 2020 before embarking on these new endeavours.
Why is accounting so important?
Management has requested that the financial accountant collect all the relevant financial information
relating to the two products for the 2019 financial year, and prepare a budget for them for 2020. The
financial accountant is not sure how to allocate some of the cost between the two products, but all the
3. How did the company obtain anu use
other relevant budget information relating to the two products for the financial year ending 30 June 2019
is summarised in the table below (note that this is summarised on a per unit basis):
lates and reports on financial info
Financial information for the 30 June 2019 financial year
Laptop
iPod
Selling price
R15 000
2 000
Direct materials
R4 500
R400
Direct labour (R160 per hour)
R1 920
R320
Variable marketing and distribution costs
R800
R200
Understanding statements of comprehensive income, financial position and cash flows:
Fixed marketing and distribution costs
R600
R100
Actual production and sales in units
900
2 700
Macro Hardware Limited adopted just-in-time method and does not keep inventory of laptops or
iPods. Also, there is no opening or closing work-in-progress or raw materials for both products.
Direct labourers used in the manufacturing of the products signed fixed-term contracts with the
company so that they can be paid for both idle and production hours. Labourers were operating at
nd profit can be monitored, planned and
full capacity during the 30 June 2019 financial year - hence the possible expansion need.
Fixed marketing and distribution costs have been allocated to units based on actual sales volume
that were sold during the 2019 financial year. The laptop and iPod prices are dictated by the market
and Macro Hardware Limited does not have much room to increase the selling prices. The expected
production and sales in units for the 30 June 2020 financial year is as follows:
Budget information for the 30 June 2020 financial year
Laptop
iPod
Expected production and sales in units
800
2 400
O
The total fixed manufacturing overheads costs for the 2019 financial year was R7 650 000 and it is
expected to remain the same in the 2020 financial year. Fixed manufacturing overhead costs are
currently allocated to production based on the number of direct labour hours.
REQUIRED
Marks
(a)
Determine the margin of safety units for Macro Hardware Limited in the financial
year ending 30 June 2020 assuming the expected sales mix remains constant.
11
Prepare a performance budget for the laptops and iPods manufactured by
Macro Hardware Limited and for the business as a whole for the financial year
(b)
ending 30 June 2020 using the absorption costing method. The budget should
10
have the following headings:
Laptop
iPods
Total
( C )
Comment on the budgeted profitability of Macro Hardware Limited for the
18
financial year ending 30 June 2020 and make recommendations that will improve
the profitability of the business.
(d)
Critically evaluate the allocation of fixed manufacturing overheads between the
two products (i.e. laptops and iPods) and make recommendation for improvement
9
(if any) for Macro Hardware Ltd.

attachment_08062019.png

Macro Hardware Limited manufactures two types of products, a laptop and an ipod and sells them in a
very competitive market. Both products are funky light-weight products that are designed for the 15 to
25 year old age group market. Due to the popularity of their products, Macro Hardware Limited is
Central to modern business
considering expanding into different target markets during the next financial year that commences on 1
July 2019. However management wish to first evaluate the risk and expected profitability of the existing
target market for 2020 before embarking on these new endeavours.
Why is accounting so important?
Management has requested that the financial accountant collect all the relevant financial information
relating to the two products for the 2019 financial year, and prepare a budget for them for 2020. The
financial accountant is not sure how to allocate some of the cost between the two products, but all the
3. How did the company obtain anu use
other relevant budget information relating to the two products for the financial year ending 30 June 2019
is summarised in the table below (note that this is summarised on a per unit basis):
lates and reports on financial info
Financial information for the 30 June 2019 financial year
Laptop
iPod
Selling price
R15 000
2 000
Direct materials
R4 500
R400
Direct labour (R160 per hour)
R1 920
R320
Variable marketing and distribution costs
R800
R200
Understanding statements of comprehensive income, financial position and cash flows:
Fixed marketing and distribution costs
R600
R100
Actual production and sales in units
900
2 700
Macro Hardware Limited adopted just-in-time method and does not keep inventory of laptops or
iPods. Also, there is no opening or closing work-in-progress or raw materials for both products.
Direct labourers used in the manufacturing of the products signed fixed-term contracts with the
company so that they can be paid for both idle and production hours. Labourers were operating at
nd profit can be monitored, planned and
full capacity during the 30 June 2019 financial year - hence the possible expansion need.
Fixed marketing and distribution costs have been allocated to units based on actual sales volume
that were sold during the 2019 financial year. The laptop and iPod prices are dictated by the market
and Macro Hardware Limited does not have much room to increase the selling prices. The expected
production and sales in units for the 30 June 2020 financial year is as follows:
Budget information for the 30 June 2020 financial year
Laptop
iPod
Expected production and sales in units
800
2 400
O
The total fixed manufacturing overheads costs for the 2019 financial year was R7 650 000 and it is
expected to remain the same in the 2020 financial year. Fixed manufacturing overhead costs are
currently allocated to production based on the number of direct labour hours.
REQUIRED
Marks
(a)
Determine the margin of safety units for Macro Hardware Limited in the financial
year ending 30 June 2020 assuming the expected sales mix remains constant.
11
Prepare a performance budget for the laptops and iPods manufactured by
Macro Hardware Limited and for the business as a whole for the financial year
(b)
ending 30 June 2020 using the absorption costing method. The budget should
10
have the following headings:
Laptop
iPods
Total
( C )
Comment on the budgeted profitability of Macro Hardware Limited for the
18
financial year ending 30 June 2020 and make recommendations that will improve
the profitability of the business.
(d)
Critically evaluate the allocation of fixed manufacturing overheads between the
two products (i.e. laptops and iPods) and make recommendation for improvement
9
(if any) for Macro Hardware Ltd.

attachment_08062019.png

Macro Hardware Limited manufactures two types of products, a laptop and an ipod and sells them in a
very competitive market. Both products are funky light-weight products that are designed for the 15 to
25 year old age group market. Due to the popularity of their products, Macro Hardware Limited is
Central to modern business
considering expanding into different target markets during the next financial year that commences on 1
July 2019. However management wish to first evaluate the risk and expected profitability of the existing
target market for 2020 before embarking on these new endeavours.
Why is accounting so important?
Management has requested that the financial accountant collect all the relevant financial information
relating to the two products for the 2019 financial year, and prepare a budget for them for 2020. The
financial accountant is not sure how to allocate some of the cost between the two products, but all the
3. How did the company obtain anu use
other relevant budget information relating to the two products for the financial year ending 30 June 2019
is summarised in the table below (note that this is summarised on a per unit basis):
lates and reports on financial info
Financial information for the 30 June 2019 financial year
Laptop
iPod
Selling price
R15 000
2 000
Direct materials
R4 500
R400
Direct labour (R160 per hour)
R1 920
R320
Variable marketing and distribution costs
R800
R200
Understanding statements of comprehensive income, financial position and cash flows:
Fixed marketing and distribution costs
R600
R100
Actual production and sales in units
900
2 700
Macro Hardware Limited adopted just-in-time method and does not keep inventory of laptops or
iPods. Also, there is no opening or closing work-in-progress or raw materials for both products.
Direct labourers used in the manufacturing of the products signed fixed-term contracts with the
company so that they can be paid for both idle and production hours. Labourers were operating at
nd profit can be monitored, planned and
full capacity during the 30 June 2019 financial year - hence the possible expansion need.
Fixed marketing and distribution costs have been allocated to units based on actual sales volume
that were sold during the 2019 financial year. The laptop and iPod prices are dictated by the market
and Macro Hardware Limited does not have much room to increase the selling prices. The expected
production and sales in units for the 30 June 2020 financial year is as follows:
Budget information for the 30 June 2020 financial year
Laptop
iPod
Expected production and sales in units
800
2 400
O
The total fixed manufacturing overheads costs for the 2019 financial year was R7 650 000 and it is
expected to remain the same in the 2020 financial year. Fixed manufacturing overhead costs are
currently allocated to production based on the number of direct labour hours.
REQUIRED
Marks
(a)
Determine the margin of safety units for Macro Hardware Limited in the financial
year ending 30 June 2020 assuming the expected sales mix remains constant.
11
Prepare a performance budget for the laptops and iPods manufactured by
Macro Hardware Limited and for the business as a whole for the financial year
(b)
ending 30 June 2020 using the absorption costing method. The budget should
10
have the following headings:
Laptop
iPods
Total
( C )
Comment on the budgeted profitability of Macro Hardware Limited for the
18
financial year ending 30 June 2020 and make recommendations that will improve
the profitability of the business.
(d)
Critically evaluate the allocation of fixed manufacturing overheads between the
two products (i.e. laptops and iPods) and make recommendation for improvement
9
(if any) for Macro Hardware Ltd.

attachment_08062019.png

1: Finan
Question 2 (a)
Margin of Safety = Expected Sales Units - Break Even Sales Units
2020 Expected Sales Units
. Laptop = 800
.
IPod = 2400
Break Even Sales Units (1 item)
= Total Fixed Manufacturing Overhead Costs + Contribution Margin Per Unit
Total Fixed Manufacturing Overhead Cost = 7,650,000
Contribution Margin Per Unit = Selling Price per unit - Variable Costs per unit
Component
Laptop
IPod
Selling Price per unit
15,000
2,000
Direct Material per unit
(4,500
(400)
Direct Labour per unit
(1,920
(320
Contribution Margin per unit
8,580
1,280
9700
1500
Weighted Average Contribution Margin per unit (based on expected sales mix)
Sales Mix
. Total expected sales = 800 (laptops) +2400 (IPods) = 3200
Laptops Mix = 800 + 3200 = 25%
Ipods Mix = 2400 + 3200 = 75%
Weighted Average Contribution Margin
Item
Calculation
Answer
Laptop
8,580 x 25%
2,145
Ipod
1,280 x 75%
960
Weighted Average Contribution Margin
3, 105
Break Even Units (more than 1 items)
= Total Fixed Manufacturing Overhead Costs : Weighted Average Contribution
Margin
= 7,650,000 + 3,105
= 2464 units

attachment_08062019.png

1: Finan
Question 2 (a)
Margin of Safety = Expected Sales Units - Break Even Sales Units
2020 Expected Sales Units
. Laptop = 800
.
IPod = 2400
Break Even Sales Units (1 item)
= Total Fixed Manufacturing Overhead Costs + Contribution Margin Per Unit
Total Fixed Manufacturing Overhead Cost = 7,650,000
Contribution Margin Per Unit = Selling Price per unit - Variable Costs per unit
Component
Laptop
IPod
Selling Price per unit
15,000
2,000
Direct Material per unit
(4,500
(400)
Direct Labour per unit
(1,920
(320
Contribution Margin per unit
8,580
1,280
9700
1500
Weighted Average Contribution Margin per unit (based on expected sales mix)
Sales Mix
. Total expected sales = 800 (laptops) +2400 (IPods) = 3200
Laptops Mix = 800 + 3200 = 25%
Ipods Mix = 2400 + 3200 = 75%
Weighted Average Contribution Margin
Item
Calculation
Answer
Laptop
8,580 x 25%
2,145
Ipod
1,280 x 75%
960
Weighted Average Contribution Margin
3, 105
Break Even Units (more than 1 items)
= Total Fixed Manufacturing Overhead Costs : Weighted Average Contribution
Margin
= 7,650,000 + 3,105
= 2464 units

attachment_08062019.png

1: Finan
Question 2 (a)
Margin of Safety = Expected Sales Units - Break Even Sales Units
2020 Expected Sales Units
. Laptop = 800
.
IPod = 2400
Break Even Sales Units (1 item)
= Total Fixed Manufacturing Overhead Costs + Contribution Margin Per Unit
Total Fixed Manufacturing Overhead Cost = 7,650,000
Contribution Margin Per Unit = Selling Price per unit - Variable Costs per unit
Component
Laptop
IPod
Selling Price per unit
15,000
2,000
Direct Material per unit
(4,500
(400)
Direct Labour per unit
(1,920
(320
Contribution Margin per unit
8,580
1,280
9700
1500
Weighted Average Contribution Margin per unit (based on expected sales mix)
Sales Mix
. Total expected sales = 800 (laptops) +2400 (IPods) = 3200
Laptops Mix = 800 + 3200 = 25%
Ipods Mix = 2400 + 3200 = 75%
Weighted Average Contribution Margin
Item
Calculation
Answer
Laptop
8,580 x 25%
2,145
Ipod
1,280 x 75%
960
Weighted Average Contribution Margin
3, 105
Break Even Units (more than 1 items)
= Total Fixed Manufacturing Overhead Costs : Weighted Average Contribution
Margin
= 7,650,000 + 3,105
= 2464 units

attachment_08062019.png

Recommendations
Management may consider discontinuing the production and sale of the ipods due to
them seeming not being profitable
. This may be further supported by the fact that technological advancements will
continue making devices like ipod undesirable as othe devices like cell phone
are able to perform Ipod related tasks (storing music) and more.
The market is likely to decrease the selling price of ipods due to looming
technological advancements. This will continue to eat into the profitability of the
Ipods. \
. Discontinuing the production and sale of Ipods will allow the company to benefit
from costs save from no longer producing and selling the Ipods.
Managements must consider an alternative (more accurate) approach for allocating
the overheads costs to ensure all item are costed accurately.
Management may look into locating alternative suppliers who may offer the material
at more reasonable rates.
Managements should consider training stuff more frequently to improve/reduce the
times each labourer takes to manufacture the laptops and ipod to reduce labour
costs,
Management should consider introducing machinery equipment to improve
production efficiencies and reduce direct labour costs.

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