1. a) Bara enterprises operates in Kitale town. On annual basis, it orders 480,000 pens form a Nairobi based distributor. A packet of 24 pens delivered to Baras warehouse cost sh 480 including transport charges. The supermarket barrows money from ABC bank of an interest rate of 10% p.a to finance its inventories. The supermarket also incurs sh 1,500 to place an order for the pens and sh 8 carrying cost for each pen REQUIRED: i) Calculate the economic order quantity (EOQ) for the pens ii) Total cost of the EOQ. iii) For orders for 72,000 pens and above the distributer has offered a discount rate of 10% on delivery price. Advice the management of the supermarket on whether to take advantages of the discount offer. (6 Marks) b) Wilson an automotive technician has been operating a garage in Mombasa for the past two years. A year ago he converted part of his garage to a welding shop making and selling metal doors and windows. He had anticipated that he cost of welding shop would primarily be final but has realized that the welding cost increased with the increase in number of welding job assignment. The costs of welding job assignments are as follows. Perched No of welding job assignments Total cost sh 000 Sept 2008 280 700 Oct 2008 800 860 Nov 2008 1,240 110 Dec 2008 1,000 960 Jan 2009 600 720 Feb 2009 920 910 Mar 2009 860 880 Apr 2009 1,200 260 REQUIRED: Formulate an equation to estimate the total cost of the welding shop and compute the cost of undertakings 1256 assignment using i) High-low method ii) Simple linear regression method. (6 Marks) 2. Tropical ltd produces powder soap for households use. The standard direct costs per carton containing 20 packets of one kg each is as follows: Raw materials 15 kgs of tallons @ sh 10 per kg 10 kgs of caustic soda @ sh 16 per kg Labour 20 hours @ 5 per hour Packed materials 20 packets @ 50 cents each 1 carton @ sh 5 each The monthly budget is per 1,000 cartons. The overhead expenses which are all Fixed are budgeted at sh 40,000 and selling price per 1kg packet of soap is sh 25. the following details relate to October 2007 when 1,200 cartons of soap Were produced and sold Ksh Sales 1,200 cartons 552,000 Raw materials: Tallow 10,800 kgs 129,600 Caustic soda 13200 kgs 198,000 Labour; 26,400 hours 145,200 Fixed overhead expenditure 42,000 REQUIRED: calculate a) Price and usage variances each raw materials. (8 Marks) b) Labour rate and efficiency variances. (3 Marks) c) Sales price and volume variances. (5 Marks) d) Overhead expenditure variances. (2 Marks