Q.1

a)Why might a company claim that the total cost of employing a person is $15.30 per hour when the employee's wage rate is $10.50 per hour? How should this difference be classified and why? (05 marks)

b)Explain why the income statement of a manufacturing company differs from the income statement of a merchandising company? (05 marks)

c)The following costs are incurred by an electrical appliance manufacturer. Classify these costs as direct materials, direct labor, and manufacturing overhead, selling, or administrative costs.

i)President's salary. ( mark)

ii)Cost of electrical wire used in making appliances. ( mark)

iii)Cost of janitorial supplies (the janitors work in the factory. ( mark)

iv)Wages of assembly-line workers. ( mark)

v)Cost of promotional displays. ( mark)

vi)Assembly-line supervisor's salary .( mark)

vii)Cost accountant's salary (the accountant works in the factory). ( mark)

viii)Cost of cleaner used to clean appliances when they are completed .( mark)

ix)Cost of aluminum used for toasters.( mark)

x)Cost of market research survey.( mark)

Q.2

Walk-Toki Manufacturing Company is a producer of music compact discs (CDs) and tapes. The following account balances are for the year ended December 31, 2020

Administrative expenses

$ 60,000

Depreciation expense - Manufacturing equipment

$50,000

Direct labor

$468,000

Manufacturing supplies expense

$40,000

Indirect labor

$36,000

Beginning inventories, January 1:

Direct materials

$14,000

Work in process

$20,000

Finished goods

$128,000

Ending inventories, December 31:

Direct materials

$44,000

Work in process

$56,000

Finished goods

$92,000

Direct materials purchases

$216,000

Rent expense - Factory

$28,000

Sales

$1,400,000

Selling expense

$72,000

Other manufacturing overhead

$126,000

Required;

(i)Produce a statement of cost of goods manufactured for Walk-Toki Manufacturing Company for the year ended December 31. (12 marks)

(ii)Produce an income statement for the year ended December 31, 2020. (08 marks)

Total, 20marks

SECTION B

Attempt any Three Questions

Q.3

The Oceanside Garden Nursery buys flowering plants in four-inch pots for $1.00 each and sells them for $2.50 each.Management budgets monthly fixed costs of $2,100 for sales volumes between 0 and 5,000 plants. Data has been summarized below;

DATA

Description

Amount

Sales price per unit

$2.50

Variable cost per unit

$1.00

Total fixed costs

$2,100

Profit at breakeven

0

Target profit

$5,000

Required;

a)Compute the contribution margin per unit. ( 04 marks)

b)Use the contribution margin approach to compute the company's monthly breakeven point in units. (04 marks)

c)Use the contribution margin ratio approach to compute the breakeven point in sales dollars. (04 marks)

d)Use the contribution margin approach to compute the monthly sales units required to earn a target operating income of $5,000. (04 marks)

e)Compute the company's margin of safety percentage. (04 marks)

Total, 20 marks

Q.4

Mr. Bean's chocolate Wiggly bars pass through two processes. The data for the month just ended are:

Cost Item

Kg

$

Cost Item

$

Process 1

Ingredients

4,000

5,000

Process 2

Packaging

10,000

Labour

4,000

Labour

6,000

Overheads

2,000

Overheads

3,000

Mr. Bean allows the staff to eat 5% of the chocolate as they work on Process 1. There was no work in progress at the month end.

a)Prepare the two process accounts and calculate the cost per kg. (10 marks)

b)Produce a finished goods account. (05 marks)

c)How would Mr. Bean benefit while using process costing? (05 marks)

Total, 20 marks

Q.5

a)You are the lead procurement manager of your company which is already manufacturing its entire products internally without involving any outside contractor. Management has consulted you on "make or buy" decisions. How would you weigh in or advise management to such a query? (12 marks)

b)Explain the relevant and irrelevant costs that would arise from your decision taken.(08 marks)

Total, 20 marks