iMotor Sport Ltd produces two types of super sport cars (“Adventure” and “Power”). The target market of the two sport cars is the high-end of the of the Lowest Standard Measure (LSM) in South Africa. iMotor Sport has a 31 December year-end. The management accounting department reported that direct manufacturing costs have decreased significantly while the indirect manufacturing costs have gone up. The traditional accounting system could therefore not accurately account for increased indirect costs. The company decided to change from applying the traditional costing method and to adopt activity-based costing, effective from the beginning of the current financial year. The company has conducted an analysis of indirect manufacturing costs and established that the costs for various activities are as follows for the period ending 31 December 2019. R Machining costs 1 750 000 Assembling costs 1 500 000 Quality inspections 3 510 000 Stores receiving costs 1 740 000 Stores issues costs 2 750 000 Total 11 250 000 The analysis indicated the following information regarding the company’s products: Adventure Power Budgeted production (number of cars) 550 800 Cars per production run 5 20 Quality inspections per production run 10 40 Number of parts delivered during the year 246 450 Number of issues from stores 2 000 3 500 Additional information: 1. Budgeted machine costs for the Adventure and Power are estimated to be R1 000 000 and R1 250 000, respectively for each of the sport car. 2. The analysis also revealed that it requires 100 machine hours to manufacture one Adventure super sport car and 150 machine hours to manufacture the Power super sport car. REQUIRED Marks (a) Calculate the budgeted total production costs per super sport car using activitybased costing for the period ending 31 December 2019.
