Khorab ltd manufactures chocolate candy .The company's management accounts are drawn up on a monthly basis as per the financial managers ( FM) recommendation .Ms Nghitewa ,who is the company's FM provided you with the following information in respect of January 2019:

N$

Purchases (Direct & Indirect material) 460 000

Office Salaries 45 000

Freight on Sales 12000

Rent 30 000

Freight on purchases 8000

Property rates and taxes 55 000

Insurance 20 000

Depreciation 55 000

Balances on January 2019:

Raw Materials 35 000

Work in process 106 000

Finished Goods (7000 kg) 136 500

Balances on 31 January 2019

Raw materials 42 000

Work in process 90 000

Finished goods (2000 kg) 40 400

Additional Information

.The payroll of the factory workers for January 2019 is as follows

{ OVERTIME } {DEDUCTIONS }

N$	Normal	Basic	Premium	Leave Payment	Gross wages	Pension	PAYE	Medical
Manufacturing	200 000	80 000	40 000	7000	327 000	16 000	25 000	8000
Supervisors	40 000	10 000	5000	-	55 000	3000	4700	1500
Cleaners	9000	2000	1000	-	12 000	1000	1500	500

Manufacturing staff are paid at N$40 per hour .Overtime is paid at 1.5 times normal rate .Khorab ltd contributes 150% for all employees to the pension fund and in equal part to the medical fund .Leave is provided for at N$ 12 000 per month.

.Manufacturing overhead is allocated on the basis of direct labour hours .Budgeted manufacturing overhead amounted to N$ 252 000 while budgeted direct labour hours amounted to 6000 for the month under review .

.The rental expense includes rent for both the factory and administration buildings.The factory rent expense is double the rental of the administrative buildings.

.All completed chocolate sweets are painted different colours .The paint is the only indirect material used in the manufacturing process .The factorys records show that 500 litres paint were used during the month.The cost of the paint is N$82 per litre.

.Property rates and taxes are only charged on the factory premises.

.The folioing breakdown of the insurance was obtained from the insurance schedule:

Factory 40%

Office Building 30%

Shop 30%

.Depreciation expense consists of the following :

Factory equipment N$ 34 000

Office equipment N$ 16 000

Shop Equipment N$ 5000

.The company produced 50 000 kg of chocolate candy in January 2019 (probably you meant January) .The current selling price of chocolate candy is N$46 per kilogram.

REQUIRED:

1.1 Prepare a schedule of cost of goods manufactured and sold for Khorab ltd for January 2019. Khorab ltd closes off all over-or under -Allocated manufacturing overhead to cost of goods sold at the end of each month ( marks 15)

1.2

Bunny ltd Manufactures a single product .Its statement statement of profit and loss for the two years are given below:

	2019	2018
Units Sold	300000 units	240 000 units
Sales revenue	N$1 500 000	N$ 1 200 000
Cost of goods sold	N$ 800 000	N$ 740 000
gross margin	N$ 700 000	N$ 460 00
less :operating expenses	N$ (450 000)	N$ (420 000)
net income	N$ 250 000	N$ 40000

The company's cost of goods sold and operating expenses are mixed costs

1.2 Using the high -low method, separate the cost of goods sold and operating expenses into their variable and fixed elements ,and accordingly determine the cost estimation formula for each other type of cost. (Marks 10 )