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MedTech

Ubuntu (MDU) is a South African medical technology manufacturer producing

portable diagnostic screening devices used in rural clinics and public

hospitals across Sub-Saharan Africa.

the 2026 strategic planning meeting, the Marketing Director of MDU expressed

concern about the reported profitability of the VitaScan Pro product line. She

questioned whether the current method of allocating fixed manufacturing

overheads (FMO) fairly reflects the actual consumption of resources by each

product.

She

stated:

“HealthLite

monitors are produced in much higher volumes than VitaScan Pro. It does not

seem reasonable that VitaScan Pro absorbs such a large portion of fixed

overheads when HealthLite is manufactured in far greater quantities.”

The

management accountant then recommended a review of the costing system. You were

consulted as an expert in

Activity

-Based Costing (ABC) to reassess how fixed

manufacturing overheads should be allocated.

Production

Plan for 2026

VitaScan

Pro units produced: 24 000

HealthLite

monitor units produced: 48 000

Total

budgeted fixed manufacturing overheads (FMO): R12 600 000

analysis of the underlying activities for the upcoming 2026 financial year

identified the following relationships between the total budgeted FMO of

R12
600 000
and the key production activities:

Activity	VitaScan Pro	HealthLite	Total Allocation of FMO R
Precision assembly and calibration	7minutes per unit	3 minutes per unit	5 670 000
Equipment reconfiguration and system adjustments	1 setup per 1 500 units	1 setup per 2500 units	3 780 000
Regulatory compliance and clinical validation testing	1 validation test on every 5^th unit manufactured	1 validation test on every 8^th unit manufactured	3 150 000

The

precision assembly and calibration costs allocated to HealthLite is (rounded to two decimals) R__________.

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