Durable Ltd produces shoes for sale. The company will only produce shoes after customers have confirmed their orders. 300 pair of shoes were produced and sold in 20X6. The following shows the overhead costs incurred for each business activity for 20X6.

Costs incurred in 20X6

Supervisors salary and benefits Hourly workers wages and benefits Equipment depreciation and rentals Equipment repairs

Purchased costs per pair of shoes

$

4,500 18,000 6,500 5,500 34,500

$130

(6 marks)

Equipment repairs cost of $2,500 was deemed as fixed cost and the remaining equipment repairs cost was considered as variable cost. The cost driver for all variable costs was the number of pair of shoes sold.

(i) Calculate the fixed cost and variable overhead cost per pair of shoes sold and hence derive the total costs for 20X6.

ACC202 Copyright 2017 Singapore University of Social Sciences (SUSS) Page 2 of 10 Examination July Semester 2017

(ii) In 20X6, the selling price of a pair of shoes was $250. Calculate the profit of Durable Ltd for 20X6.

(7 marks)

(d) Durable Ltd (as in (c) above) decides to use management accounting data from the last 6 years of operations (20X1 to 20X6) to better analyse and estimate their overhead costs. It was discovered that Durable Ltd sold the most number of pair of shoes in 20X6 and the lowest number of pairs of shoes in 20X3 when only 100 pair of shoes were sold. The total overhead cost for 20X3 was $20,000.

1. (i) Use the high-low method, determine the variable overhead cost per pair of shoes sold and the fixed cost of Durable Ltd.

2. (ii) Using the variable overhead cost and fixed costs computed based on the High-Low method, compute the breakeven sales in unit if the selling price and purchased cost remain at $250 and $130 respectively.

(c)Durable Ltd produces shoes for sale. The company will only produce shoes after customers have confirmed their orders. 300 pair of shoes were produced and sold in 20X6. The following shows the overhead costs incurred for each business activity for 20X6 Costs incurred in 20X6 Supervisor's salary and benefits 4,500 Hourly workers' wages and benefits Equipment depreciation and rentals 18,000 6,500 5,500 Equipment repairs 34,500 $130 Purchased costs per pair of shoes Equipment repairs cost of $2,500 was deemed as fixed cost and the remaining equipment repairs cost was considered as variable cost. The cost driver for all variable costs was the number of pair of shoes sold. (i)Calculate the fixed cost and variable overhead cost per pair of shoes sold and hence derive the total costs for 20X6. ii) n 20X6, the selling price of a pair of shoes was $250. Calculate the profit of Durable Ltd for 20X6. (7 marks) Durable Ltd (as in (c) above) decides to use management accounting data from the last 6 years of operations (20XI to 20X6) to better analyse and estimate their overhead costs. It was discovered that Durable Ltd sold the most number of pair of shoes in 20X6 and the lowest number of pairs of shoes in 20X3 when only 100 pair of shoes were sold. The total overhead cost for 20X3 was $20,000. (d) (i) Use the high-low method, determine the variable overhead cost per pair of shoes sold and the fixed cost of Durable Ltd (ii Using the variable overhead cost and fixed costs computed based on the High-Low method, compute the breakeven sales in unit if the selling price and purchased cost remain at $250 and $130 respectively. (9 marks)