No need to follow textbook format for parts (ii) and (iii). You can use your own format for answering them.

LTC manufacturers an extensive range of high-quality brass and chrome taps and has an excellent reputation for quality. The company is managed by Noah Kimmel and employs 20 people. It has annual sales averaging approximately $1 million. Although it has been consistently profitable, LTC has experienced increasing pressure from competitors in recent years. The company uses a cost-plus approach to pricing but is having to reduce its markup constantly in order to maintain market share Noah qualified as an engineer. The business is small and has never been able to employ an accountant. Instead, a bookkeeper calculates monthly profit as sales revenue minus expenses. Prices are based on rough estimates of the cost of direct material and direct labour inputs plus a 50 per cent markup With the decline in profit and constant pressure on prices, Noah began to feel uneasy about the way costs and profits were calculated. The results for the month ending 31 January were Sales $980,000 Less Expenses: Materials purchased Factory wages- production line Production line supervisor's salary Premises Council rates Sales and admin staff salaries Advertising Equipment depreciation (incl. truck) Electricity Manager's (Noah's) salary Truck lease 300,000 250,000 35,000 80,000 5,000 110,000 18,000 25,000 12,000 80,000 10,000 Total expenses Net profit S 55,000 Additional information There was no beginning inventory of raw material, work in process and finished goods. At the end of the month, 10 per cent of the materials purchased remained on hand, work in process amounted to 20 per cent of the manufacturing costs incurred during the month and finished goods inventories were negligible .The factory occupies 80 per cent of the premises, the sales area occupies 15 per cent and administration 5 per cent. Most of the equipment is used for manufacturing, with only 5 per cent of the book value being used for sales and administrative functions. Almost all of the electricity is consumed in the factory The truck is used to deliver finished goods to customers. Noah spends about half of his time on factory management, the rest of his time in the sales area and on administration. Required: Show ALL your workings. Comment on the cost classifications currently being used in LTC's income statement. (3 marks) () Prepare a schedule of cost of goods manufactured and cost of goods sold, as per (11 marks) Exhibit 2.7 (p.55) of the textbook. ()Prepare a revised income statement for the month, as per Exhibit 2.7 (p.55) of the (8 marks) textbook. Explain what constitutes the difference between the income statement you prepared (3 marks) (iv) in part (ili) and the one prepared by the company's bookkeeper. Evaluate the usefulness of product costs based on direct materials and direct labour. (5 marks) (v)