Q.1 (a) Compare / contrast. Why are these two different?

a)Inventoriable costs and period costs.

b)Direct costs and indirect costs.

c)Manufacturing costs and non-manufacturing costs.

d)Period costs and product costs.

e)Operating costs and non-operating costs.

Q.1 (b) A client approached to Incredible Fabricating and Manufacturing for a one-time special order for Steel doors. These Steel doors are fabricated and manufactured to local clients regularly.

The cost per unit information apply for deals to regular clients:

Direct materials$1,982

Direct labor810

Variable manufacturing overhead 1,296

Fixed manufacturing overhead2,808

Total manufacturing costs6,896

Markup (50%)3,348

Targeted selling price$10,244

Incredible Fabricating and Manufacturing has ample idle capacity.

Required:

a.What is the full cost of the product per unit if the marketing costs is $2,000?

b.What is the contribution margin per unit?

c.Which costs are relevant for making the decision regarding this one-time-only special order? Why?

d.For Incredible Fabricating and Manufacturing, what is the minimum acceptable price of this one-time-only special order?

e. For this one-time-only special order, should Incredible Fabricating and Manufacturing consider a price of $5,400 per unit? Why or why not?

Q.2

a.Budgets are an integral part of management control systems. Evaluate this statement with real life example.

b.

Xavier Sound Industries manufactures and sells two models of headphones, Regular and Classic. It expects to sell 6,000 units of Regular and 2,000 units of Classic in 2021.The following estimates are given for 2021:

RegularClassic

Selling priceRs. 1000 Rs. 1500

Xavier had an inventory of 400 units of Regular and 150 units of Classic at the end of 2020. It has decided that as a measure to counter stock outages it will maintain ending inventory of 700 units of Regular and 400 units of Classic.

Each headphone requires 5 units of material- C, and 6 units of Material-D. Both have to be imported at a cost of Rs. 20 per unit. There were 1000 units of material- C, and 1200 units of material- D in stock at the end of 2020.The management does not want to have any stock of both materials at the end of 2021.

It requires 30 minutes of direct labor time to produce Regular and 45 minutes Classic, direct labor cost is Rs. 500 per hour.

Variable overhead costs Rs. 55 per direct labor hour. Fixed overhead costs Rs. 300,000 per year.

You are required to apply fixed budgeting knowledge and answer the following with respect of 2021:

I.Sales budget

II.Production budget

III.Direct material purchase budget

IV.Direct labor cost budget

V.Factory overhead budget

VI.Manufacturing cost budget