Mazoon Dairy Company is the largest integrated dairy company in the Sultanate of Oman with a capital outlay of OMR 100 million. The site is located in AsSunainah in the Al BuraimiGovernorate and is spread over an area of 15 sq kms. MazounDiary produces a wide array of products, including fresh milk, long life milk, flavoured milk, yoghurt, laban, ice-cream, cheese and juices, reaching our consumers across the GCC region.

During the month of February 2022, the following transactions have occurred in the month of February 2022 with regard to the flow of material into and out of its store room.

February 1, 2022 stock of material available 300 units @ OMR 5.000 each.

February 2; issued material to production 250 units

February 5; purchased 200 units @ OMR 5.200 each

February 7; issued material to production 100 units

February 10; Purchases 150 units @ OMR 4.500 each

February 12; issued material 100 units

February 20; Purchases 180 units @ OMR 4.500 each

February 28; issued material 200 units.

The company had 50 workers in its factory payroll. In the month of February 2022, a worker Qais processed 200 units of a product working for 48 hours. The company give remuneration to its employees at an hourly rate of OMR 5.500 per hour worked. The estimated time to process one product is 6 minutes.

Your tasks

1. Analyse the nature of business and suggest the most suitable costing method to be used by Ibri farm Equipment LLC for ascertain the total cost of its products. Give reason for your choice of costing method(s).