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Fitness Fanatics (Pty) Ltd ("Fitness Fanatics") was established in 2011 by Ms. Thembi Mutsamayi and is based in Krugersdorp. The company is a processor and distributor of a popular type of protein energy bar called Pumpkin Seed. The company has a 30 June year-end. Budgeted data for the year ended 30 June 2020 are as follows: Pumpkin Seed Sales units 1 500 000 Selling price per unit R38,50 Direct material costs per unit R12,00 Some of the company costs in total (Rand) for the 2020 financial year were as follows: Budgeted Actual R Fixed manufacturing overheads 22 644 000 24 000 000 Direct labour 12 520 800 Fixed administrative salaries 777 000 777 000 Selling and distribution costs 2 140 000 2 000 000 R ? The Senior Management Accountant provided the following information with regard to the actual figures for the year ended 30 June 2020: Pumpkin Seed Selling price per unit R39,00 Direct material costs per unit R9.70 Direct labour rate per hour R24,00 Inventories: Pumpkin Seed Actual inventory - 1 July 2019 R3 000 000 Actual inventory - 30 June 2020 Additional information: ? 1. Quantity schedule - actual (units): Sales Opening inventory Closing inventory Pumpkin Seed 1 400 000 100 000 80 000 QUESTION 1 (continued) 2. No inventory of direct materials or work-in-progress is held. The company used the first-in- first-out (FIFO) method of inventory valuation 3. All completed protein energy bars are packaged and taken into inventory, 4. Assume that the opening and closing budgeted inventories in units are equivalent to the respective opening and closing actual inventories in units (per the above quantity schedule). 5. The actual inventory costs on 1 July 2019 also includes absorbed fixed manufacturing overheads. 6. Fixed manufacturing overheads (FMO) are absorbed based on normal capacity of 503 200 direct labour hours per year. FMO are allocated to production based on direct labour hours worked. 7. The actual direct labour hours for the 2020 financial year were 483 000. Marks (3) REQUIRED (a) Calculate the overlunder recovered fixed manufacturing overhead for the year ended 30 June 2020 assuming that the company uses an absorption costing system (b) Prepare the actual Statement of Profit or Loss (income statement) for the year ended 30 June 2020 for the company using absorption costing principles (c) State a reason why the profit you have calculated in (b) would, in principle, be different from the profit if the direct costing system was used. Note: no calculations are required in (c). TOTAL (12) (2) 17

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