Question 3
Answer the following questions:
20 MARKS
a) Construct an example of a sunk cost for business decision making. (10)
b) Briefly discuss why you think financial reports for investors and managerial reports for
managers may or may not differ in their treatment of sunk costs. (10)
Question 4
25 MARKS
Buhle Company (Pty) Ltd has put together the following data in order to complete their
operating budget for the second quarter of 2019:
Sales (units)
April
73 200
May
68 900
June
65 400
July
67 300
Additional information:
Company policy requires 60% of the following month's sales (in units) be in ending inventory.
This policy was met in March.
It takes 2.5 hours of direct labour to produce one unit.
The average wage cost is R14.
Variable overhead rate is R6 per direct labour hour and fixed overhead is R15 000 per month.
Required:
a)
Prepare a production budget for April, May and June and the quarter in total.
(10)
b)
Prepare a direct labour budget for April, May and June and the quarter in total.
(10)
c)
Prepare an overhead budget for April, May and June and the quarter in total.
(5)