A company manufactures and retails clothing.

(a) You are required to group the costs which are listed below and numbered 7 to 20 into the following classifications (each cost is intended to belong to only one classification):

(i) Direct materials

(it) Direct labour

(Hi) Direct expenses

(iv) Indirect production overhead

(v) Research and development costs

(vi) Selling and distribution costs

(vii) Administration costs

(viii) Finance costs 1 Lubricant for sewing machines 2 Floppy disks for general office computer 3 Maintenance contract for general office photocopying machine 4 Telephone rental plus metered calls 5 Interest on bank overdraft 6 Performing Rights Society charge for music broadcast throughout the factory 7 Market research undertaken prior to a new product launch 8 Wages of security guards for factory 9 Carriage on purchases of basic raw material 10 Royalty payable on number of units of product XY produced 11 Road fund licences for delivery vehicles 12 Parcels sent to customers 13 Cost of advertising products on television 14 Audit fees 15 Chief accountant's salary 16 Wages of operatives in the cutting department 17 Cost of painting advertising slogans on delivery vans 18 Wages of storekeepers in materials store 19 Wages of fork lift truck drivers who handle raw materials 20 Developing a new product in the laboratory (10 marks)

(b) During the last twelve months, the stock control and recording system of the retailing division has been computerized. Each garment is coded and, when sold, the code number, quantity and sales value is keyed on the cash till which is linked with the computer.
'Surely', a clothing store manager said to the accountant, 'there is no need for you to organize a physical stocktaking this year-end. After all, we can now press a few keys on the computer terminal and see on the visual display unit what stock is held of each item, so I am sure you can obtain a computer print-out showing the quantities we have in stock.'
You are required, as the accountant to whom the above remark was made, to write a reply addressed to the manager.