3. Cool Casuals Ltd is a small, recently established company run by Tom. It makes men's jackets and trousers. The company uses full absorption product costing for its products The estimate sales units per month have been set and the machine hours required are:- The selling price and direct costs per unit are shown below: Other costs: - Production fixed costs per month: 750,000 (Estimated production capacity is 75,000 hours. The standard production overhead is therefore 10 per production hour). - Variable selling costs are of 0.50 per product - Fixed administration and selling costs are 136,000 and are charged to products based on expected sales units. was discovered that direct materials and direct labour are variable. Required: a) Using the full absorption costing approach, produce a table showing for each garment: i) the unit product sales revenue, the costs and net income per garment, ii )the total of sales, costs and net income per garment for the month, iii) the total of each cost and revenue and profit for all products. ( 9 marks) b) If one of the products in the full absorption cost statement which you have calculated is showing a loss, explain whether the product should be discontinued from the range. (3 marks) c) Present the budgeted sales costs and net income for the month using a contribution format. (5 marks) d) Assuming that selling prices and costs will remain the same as the estimates, but more garments could be sold, provide a statement explaining to Tom which products should be given priority if net income is to be increased. You can provide several possible scenarios. (8 marks 3. Cool Casuals Ltd is a small, recently established company run by Tom. It makes men's jackets and trousers. The company uses full absorption product costing for its products The estimate sales units per month have been set and the machine hours required are:- The selling price and direct costs per unit are shown below: Other costs: - Production fixed costs per month: 750,000 (Estimated production capacity is 75,000 hours. The standard production overhead is therefore 10 per production hour). - Variable selling costs are of 0.50 per product - Fixed administration and selling costs are 136,000 and are charged to products based on expected sales units. was discovered that direct materials and direct labour are variable. Required: a) Using the full absorption costing approach, produce a table showing for each garment: i) the unit product sales revenue, the costs and net income per garment, ii )the total of sales, costs and net income per garment for the month, iii) the total of each cost and revenue and profit for all products. ( 9 marks) b) If one of the products in the full absorption cost statement which you have calculated is showing a loss, explain whether the product should be discontinued from the range. (3 marks) c) Present the budgeted sales costs and net income for the month using a contribution format. (5 marks) d) Assuming that selling prices and costs will remain the same as the estimates, but more garments could be sold, provide a statement explaining to Tom which products should be given priority if net income is to be increased. You can provide several possible scenarios. (8 marks