4G Networks provide a fast and reliable internet service. Telecoms operators, such as Vodafone Plc have

invested heavily in their infrastructure, in order to support the expansion of their mobile networks. Let us

assume that Vodafone Malta Plc has projected sales amounting to 20 million for the month of February 2019.

Of these: 14 million is generated from the sales of 4G packages and 6 million from the sales of Sim Cards.

Let's further assume that Vodafone PLC plans to build 7 large 4G antennae across London during the same

month to improve its customers' Internet broadband connection. Furthermore the indirect material cost

allocation for the production of mobile sim cards is estimated at a total cost of 300,000 during the said month,

while the indirect material cost allocation for Antennae is estimated at a total cost of 600,000.

It is estimated that one Antennea takes 28,500 hrs to produce and will require 300sqm meters of material

costing 3,000/sq meter. The construction of Antennae normally uses a direct labour hours basis of charging

indirect cost (overheads) to individual jobs.

It is projected that 900,000 sim cards will be produced this month. One sim card takes 0.5 machines hours to

produce. The production of Sim Cards normally uses a machine hour basis of charging indirect cost (overheads)

to individual jobs.

Below is a breakdown of costs incurred during the month:

Direct labour cost (Antennae) 1,470,000

Direct Labour cost (Sim Cards) 500,000

Direct labour time (Antennae) 200,000hrs

Direct labour time (Sim Cards) 25,000 hrs

Indirect labour cost (Antennae) 400,000

Indirect labour cost (Sim Cards) 100,000

Selling and distribution cost (Antennae) 30,000

Selling and distribution cost (Sim Cards) 20,000

Depreciation (Antennae) 8,000

Depreciation (Sim Cards) 2,000

Rent (Fixed cost split equally between the two (2) products) 200,000

Heating, Lighting & Power (Antennae) 60,000

Heating, Lighting & Power (Sim Cards) 40,000

Machinery time (Antennae) 50,000hrs

Machinery time (Sim Cards) 300,000hrs

Indirect Material (Sim Cards) 300,000

Indirect Material (Antennae) 600,000

Other indirect costs, overheads (Sim Cards) 30,000

Other indirect costs, overheads (Antennae) 70,000

Direct material costs (Antennae) To calculate

Direct materials costs (Sim Cards) 1,000,000

Taxation 300,000

Assume that Heating, Lighting & Power are a fixed cost.

Calculate costs using appropriate techniques of cost analysis to show an income statement using

marginal and absorption costs.

[What is the cost per antennae/sim cards using marginal and absorption costings?]