Mpilo Ltd The Electronics Industry Case Study - Accounting Assignment Help

Assignment Task

QUESTION 
ACTIVITY BASED COSTING
Mpilo Ltd was established in 2009 by the owner Mr Makhanya. and the company is currently operating in the electronics industry. Mr Makhanya is invested in optimising his corporate strategy in order to maintain market share and gain accolades of being prestige leader in this sector. This corporate strategy requires the company to maintain its costs at the lowest level. The company current has four products. Oxy. Doxy. Toxy and Soxy, and utilises the same production facility during the production process. Upon the inception stage of the company. Mpilo Ltd has been using an absorption costing system. However, this system has proved to be ineffective resulting in inaccurate product prices. Mr Makhanya is very concerned about the company's performance as this could result to loss on market share. Mr Makhanya has approached you to assist him in assessing whether it is necessary for his business to implement an Activity Based Costing. The following information relates to a budget period. 
Product Cyc Da la a Volume (units) 1000 10 000 1200 14 000 Material cost per unit R 100 R 100 R 320 R 340 Direct labour time per unit 0.5 hours 0.5 hours 2.0 hours 1.5 hours Machine time per unit 0.25 hours 0.25 hours 1.0 hours 1.5 hours Labour cost per unit R 60 R 60 R 240 R 180 
Under the present costing system production overheads are absorbed using a machine hour rate of R120. The total production overhead budget of R2 994 000 for the period has been analysed into the following activity cost pools. 
 

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