Revision Class Questions

A02 Question 3 –
Question 4
marks)
A special order to produce an additional 200 boxes of ready-to-drink Nilo at a price

of R34 was received. Nilo has idle capacity that can be utilized for this order but, the
company will incur additional cost of R1 200 to design a special label for the product.
The following data for the previous months were obtained:

Per unit Per Unit Total per Total per
month month at
1 000 boxes
Sales revenue R 40 R 40 000
Direct labour R 16 R 16 000
Direct material R4 R 4 000
Manufacturing Overhead R6 R 6 000
Total Var. Cost R 26 R 26 000
Contribution Margin R 14 R 14 000
Fixed cost R8 000
Profit R6 000
Required:
Advise the General Manager whether the company should accept the offer. (10)
(Show all calculations)
A02 LIMITING FACTOR
Question 5 (15 marks)
Nilo ready-to-drink is available in 250ml glass bottles, 175 ml plastic bottles and 150ml UHT
boxes. These items are produced using the same machines, and there is a maximum of
160,000 machine-hours available during the year for production.
The information about the production time and costs for these three items is as follows:
Glass bottles Plastic bottles UHT boxes

Hours to produce 1 0.5 0.25
Selling price R25 R20 R15
Direct material R3 R6 R3
Direct labour R1 R2 R2
Variable Overhead R4 R6 R6
Fixed Overhead R20 R20 R20
Nilo is limited in producing its products by the number of possible machine-hours. Orders
have been received for 120,000 glass bottles, 96,000 plastic bottles, and 80,000 UHT boxes,
which will require 188,000 machine-hours to produce.
Required:
Determine the mix of the different containers of Nilo ready-to-drink should be produced to
be as profitable as possible.
UNIT 5 DOWNLOADABLE RESOURCES – LINEAR PROGRAMMING
QUESTION 8:Graet Mzansi Melas (AO1 2011) CONSTRAINTS & SHADOW PRICES
PART A
Great Mzansi Meals (GMM) is a catering company based in the Southern suburbs of
Johannesburg. GMM offers monthly meals that are delivered to their clients’ doorstep.
GMM targets young single professionals and double income families with no children.
GMM offers two monthly plans: Standard Cuisine and Deluxe Cuisine. The Standard Cuisine
(S) provides frozen meals that are delivered twice a month at a R600 contribution margin per
meal. The Deluxe Cuisine (D) provides freshly prepared meals daily at a contribution margin
of R450 per meal.
GMM employs three people to work in shifts during the month. Mam Ruby is a full time
cook at GMM and works a total of 120 hours a month. Khethiwe prepares the food for Mam
Ruby to cook. Khethiwe recently had a baby and is now only prepared to work half the time
she used to. Freezing takes about three quarters of the time it takes to prepare meals. Sarah
was recently hired to freeze the meals. She will be available whenever she is needed.
The times required per meal are as follows:

Preparation Cooking Freezing
Hours Required:
Standard Cuisine 2 2 1
Deluxe Cuisine 1 3 0
The managing director does not know how to determine the most profitable number of
Standard Cuisine and Deluxe Cuisine meals to produce per month.
YOU ARE REQUIRED TO:
8.1 Calculate the optimal product mix. Show all calculations.

STANDARD COSTING A02
Question 8 (10 marks)

Nilo use four main ingredients to produce the chocolate flavoured malt drink namely
sugar, milk powder, malt barley and cocoa. During the first part of the production
process the malt barley and sugar is mixed to form a thick syrup. The water content
is then evaporated by using a vacuum dryer to reduce the mix to a granular form.
The standard mix of malt barley and sugar is as follow:

 Malt barley 5 kg at a cost of R20 p/kg
 Sugar 15 kg at a cost of R15 p/kg
In May 25 000 kg of Nilo powder was produced in granular form. The actual mixed
used in production in May was:
 9 800 kg of Malt barley and
 16 500 kg of sugar
Required:
8.1 Determine the material mix variance for the Nilo power
8.2 Determine the material yield variance for the Nilo power (5)
Transfer Price Class example
Manuca has been offered supplies of special ingredient Z at a transfer price of R15 per kg by
Helpco Ltd which is part of the same group of companies. Helpco Ltd processes and sells
special ingredient Z to customers external to the group at R15 per kg. Helpco Ltd bases its
transfer price on cost plus 25% profit mark-up. Total cost has been estimated ay 75% variable
and 25% fixed.
Required: Discuss the transfer prices at which Helpco Ltd should offer to transfer special
ingredient Z to Manuco Ltd in order that group profit maximization decisions may be taken
on financial grounds in each of the following situations.
a) Helpco Ltd has an external market for all of its production of special ingredient Z at a
special price of R15 per kg. Internal transfers to Manuco Ltd would enable R1.50 per kg pf
variable packaging cost to be avoided.
b) Conditions as per (a) above but Helpco Ltd has production capacity of 3 000kg of special
ingredient Z for which no external market is available
c) Conditions are per (b) but Helpco Ltd has an alternative use for some of its spare
production capacity. This alternative is equivalent to 2 000 kg of special ingredient Z and
would earn a contribution of R6 000.

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A02 Question 3 –

A special order to produce an additional 200 boxes of ready-to-drink Nilo at a price

The following data for the previous months were obtained:

Glass bottles Plastic bottles UHT boxes

The times required per meal are as follows:

YOU ARE REQUIRED TO:

8.1 Calculate the optimal product mix. Show all calculations.

Question 8 (10 marks)

The standard mix of malt barley and sugar is as follow:

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