Q1

A) Cost & Management Accountants are often required for providing information to the business management for the sake of making decisions. For this purpose, accountants must clearly understand different costs involved in business decisions and their connection to various situations in decision making.

Required:

Discuss and differentiate in detail between Sunk Cost and Relevant Cost with the help of relevant examples from real-life. (4 Marks)

B) Dawn Flour Mills specializes in producing flour and related products. Following is the data provided by the accounts department staff for preparing financial statement:

Particulars	OMR
Income tax	15,000
Closing stock of WIP	260,000
Opening stock of WIP	340,000
Salary of factory supervisor	9,600
Cleaning supplies for office building	1,400
Direct material purchase	300,000
Depreciation of factory building	30,000
Salaries of sales staff	40,000
Sales	2,300,000
Rent of goods delivery vehicles	54,000
Freight on direct material purchases	4,000
Cleaning supplies for production	1,800
Utilities expenses for production facility	5,600
Plant insurance	5,000
Bank charges	1,700
Office stationery	2,300
Depreciation of office building	14,000
Indirect material	80,000
Closing stock of raw materials	110,000
Closing stock of finished goods	200,000
Wages of the factory janitors	4,400
Opening stock of raw materials	150,000
Opening stock of finished goods	500,000
Marketing expenses	16,000
Wages of production labor	23,000
Property tax on admin building	3,000
Security of production facility	14,000

Required:

a) Prepare Cost of Goods Manufactured and Sold Statement. (4 Marks)

b) Prepare Income Statement. (2 Marks)