Only solve task2

Task 1 (LO: 1,4,7)

Linsay traders are renown in manufacturing teak wood designer tables. Linsay traders has appointed you as a junior cost accountant and has requested you to prepare a report for the management based on the details furnished below. The following costs were incurred during the companys first year of operations:

Variable costs per unit:

Manufacturing:

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . $36

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14

Variable manufacturing overhead . . . . . . . . . . . . $4

Variable selling and administrative . . . . . . . . . . . $4

Fixed costs per year:

Fixed manufacturing overhead . . . . . . . . . . . . . . . . $400,000

Fixed selling and administrative expenses . . . . . . . $220,000

During the year, the company produced 40,000 units and sold 32,000 units of teak wood tables at a selling price of $100 per unit.

Required:

1. Calculate the unit product cost under both absorption costing and variable costing method.

(20 marks)

2. Prepare an income statement under both absorption costing and variable costing. (20 marks)

3. Comment on the reasons for the variations noticed in net operating income under both these methods. (10 marks)

4. The company in charge suggests an increase in selling price from $100 to $101 and prefers to sell 30000 units at $101. Comment on the feasibility of the decision. (20 marks)

Task 2 ( LO: 2,4,7)

Noora Khurram opened Nooras Baby care center. Monthly fixed costs of Nooras Baby care center are:

Rent: $800

Salaries:$1400

Other Fixed Expenses: $100

Total Fixed Cost: $2300

The cost driver for variable cost is child-days. One child day is one day in day care for one child. Variable cost is $10 per child day. An Average day has 8 children attending Nooras baby care center. Noora charges $ 30 per day per child.

1. What is the Break Even Point for Nooras Day Care Centre in Child Days and in Revenue Dollar?(5 marks)

2. Suppose the attendance of a month Is 176 child days (8 children for 22 days) what amount will Noora have left after paying all her expenses(5 marks)

3. Compute the amount Noora will have left after paying all her expenses for each of the following situations:

(Consider each case independently)

a. Average attendance is 9 children instead of 8, generating 198 child days

(9 children for 22 days)(5 Marks)

b. Variable cost increase to $12 per child(5 Marks)

c. Noora spend $300 for advertisement, which increases daily attendance to 10 instead of 8 (10 children for 22 days)(5 Marks)

d. Noora begins charging $35 per day and average daily attendance is 7 children instead of 8 (7 Children for 22 days)(5 Marks)