OBS316 Semester test 2 Costing practice PDF

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© 2021 University of Pretoria. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessibleSEMESTER TEST 2Date: 09 June 2021 Time: 09:00 – 11: Marks: 60Internal Examiner: Mr K MockeInternal Moderators: Ms Sharon Badenhorst & Mr Fani JojoziTEST INSTRUCTIONS: A...

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DEPARTMENT OF BUSINESS MANAGEMENT OBS 316 – Transportation and Warehousing Management

SEMESTER TEST 2 Date: 09 June 2021 Time: 09:00 – 11:30 Marks: 60

Internal Examiner: Mr K Mocke Internal Moderators: Ms Sharon Badenhorst & Mr Fani Jojozi TEST INSTRUCTIONS: 1. All test and examination rules and regulations are applicable. 2. This is an individual test and is subject to a plagiarism check upon submission online. Any assignment which shows evidence of plagiarism and a related high percentage will be rejected and automatically scored 0. In order to avoid a high plagiarism score, write in your own words at all times. Note that this % excludes standard template and integrity statement sections, which will be considered in your submission and subtracted from your plagiarism %. 3. Read the questions carefully and type up your report in a Microsoft Word Document. 4. Indicate your name, surname, student number and name of the assignment in the Word document. 5. Once you have completed your report, upload your final document in the relevant link on click-up “Semester test 2 submission link_Costing”. Save your work regularly and use a cloud-backup to avoid any loss in work if possible.

© 2021 University of Pretoria. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Nor may this material be posted in sharable, paid-for websites in whole or in part.

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INSTRUCTIONS Consider the transportation costing that follows. This section of the semester test is handwritten and must be submitted in the appropriate costing link. Ensure to add your name, surname, and student number on your submitted document. By completing this section, you agree to the integrity statement as stated in the report section of the test.

OBS 316 – Semester test 2 - Costing You have recently been appointed as a junior transportation analyst at one of the top 3PL companies in South Africa. You have been placed in charge of one of the client accounts: Atlas Paints (PTY) LTD. Atlas specialises in the manufacturing of paint products. They have numerous stock keeping units (SKU’s) which are sold for a variety of uses. Their main product lines include: •

Paint – Home and commercial use.

•

Craft Paint.

•

Vintage Acrylic Paint.

•

Textured Paint.

Atlas Paints has been using the services of this particular 3PL for many years and have always agreed on long term contracts with the 3PL. For this reason, the 3PL is able to provide Atlas Paints with competitive pricing on their trips, made from the factory to the centralised distribution centre. The current rates charged to Atlas per trip is as follows: •

Variable cost per km: R8.00

•

Fixed cost per km: R13.00

•

Total cost per km: R21.00

These rates apply to the trips made from the factory to the centralised distribution centre only.

© 2021 University of Pretoria. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Nor may this material be posted in sharable, paid-for websites in whole or in part.

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Atlas ships all of their paint products from their factory in Silverton, Pretoria to their centralised distribution centre in Kempton Park in the East Rand. The distribution centre is roughly 20 kilometres from OR Tambo International Airport, with an average trip time of 25 minutes one-way. The factory is roughly 52 kilometres from the distribution centre with an average trip time of 1 hour one-way. Your 3PL has dedicated ten trucks with a 10-ton payload each. A full truck load can fit roughly 10 pallets of various paint products. After a data gathering process you compiled the table below with all the transportation costing elements, which relates to servicing Atlas paints. At a quick glance, it seems that the current pricing structure will require some revision. Costing element

Value

Insurance, tracking and security services/per vehicle

R120 000 per year

Licenses and registration fees/per vehicle

R110 000 per year

Dock leveller added to all trucks

R35 000

Working days

285 days per year

Working hours

10 hours per day

Interest rate

7%

Driver Salaries/per truck

R 360 000 per year

Purchase price of a truck. All trucks were purchased on a cash basis.

R1 000 000

Oil

90 cent / km

Tyres

6 tyres per flatbed truck

Tyre life

90 000 km

Tyre prices

R3200 per tyre

Useful life of vehicles

4 years

Residual value

R45 000

General administrative expenses

R40 000 per year

IT infrastructure

R55 000 per year

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Maintenance

95 cents / km

Fuel consumption

30L/100 km

Fuel price

R17 per L

Management salary

R800 000 per year

Land and building costs

R1 000 000 per year

No return loads

-

QUESTION 1

[20 marks]

Assuming your 3PL operates on an average 9% profit margin, determine if the current rate structure charged per trip to Atlas is competitive . Make recommendations to management on how to update the current pricing structure.

QUESTION 2

[10 marks]

After speaking to the logistics manager at Atlas Paints, you realise that there is an alarming number of loads transported to the centralised distribution centre from the factory that are rejected for quality reasons. Upon further investigation you note that several pallets of paint arrived at the distribution centre damaged, with paint leaking on the pallets and inside the trucks. You decided to research some options to better secure the paint during transit and found paint transport trays which can be added to each tin of paint in transit. The image below depicts how this will work:

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Figure 1: Paint transport trays

Source: https://www.go paint.com/sites/default/files/styles/780x520/public/productimages/Paint_Transport_Tra ys_verf_verzenden.jpg?itok=T1mZ7uG3

Traditionally, the paint cans are stacked on top of each other and wrapped in plastics before loading the trucks. Because the paint transport trays will require that you pack and ship the paint in boxes, you will lose a full pallet space in your current trucks due to this additional space requirement. 2.1) Determine the impact of this initiative on the cost per pallet using your costing information from Question 1. (4 marks) 2.2) Would you recommend that the paint transport trays are implemented? Explain which factors influenced your decision. (6 marks) Total costing section: 30 marks END

© 2021 University of Pretoria. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Nor may this material be posted in sharable, paid-for websites in whole or in part....