Part A (8 Marks)

Presented below are Panetta Ltd's monthly costs and expenses data relating to its bowling shoes:

Rubber used to make shoe soles

$175 200

Rent on factory building

7500

Sales commissions paid to sell bowling shoes

42 000

Wages of assembly line workers

80 000

Salaries of factory supervisor

7000

Depreciation on factory equipment

16 000

Depreciation on delivery trucks

4000

Required:

From the above information, calculate the total amount of:

(a)Prime cost(2 Marks)

(b)Manufacturing overhead(2 Marks)

(c)Conversion cost(2 Marks)

(d)Period cost(2 Marks)

Part B (12 Marks)

Ben Ltd manufactures ducted air conditioners. Unit data for ducted air conditioner model are as follows:

Air conditioner model

Selling price

$6300

Variable costs and expenses

Direct materials

1040

Direct labour

2000

Manufacturing overhead

1000

Selling and administrative

1000

Total variable costs and expenses

$5040

The fixed costs are:manufacturing overhead $200 300, and selling and administrative expenses $41 700.

Required:

(a)Calculate the contribution margin ratio for the ducted air conditioner model.(3 Marks)

(b)Calculate the break-even point in dollars for the ducted air conditioner model.(3 Marks)

(c)(i) Calculate the margin of safety ratio assuming that the company expects to sell 420 ducted air

conditioner models.(2 Marks)

(ii) Discuss how managers of Ben Ltd use this margin of safety ratio information to manage the

profitability of the ducted air conditioner model?(4 Marks)

(Total 20 Marks)