Part A (8 Marks)

Presented below are Panetta Ltds 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)

Part A

(a)

(b)

(c)

(d)

Part B

(a)

(b)

(c)(i)

(c)(ii)