Question 1 Amron Ltd has three production departments: M,N, and O and two service departments P and Q. The following particulars are available for the month of March 2020 : Further information regarding the above indirect expenses are as follows; Working hours multiplied by horsepower of machines provides a basis for allocating industrial power and fuel charges. Direct material amounts to 150% of direct wages: Required: (a) Calculate the total cost of the production and service departments after allocating the above listed indirect expenses to production and service departments using appropriate allocation bases. (12 Marks) (b) Recalculate the total cost of production departments after reallocating the cost of service departments to production departments based on reciprocal method (simultaneous equations method). The percentage of support provided by the service departments to the other departments is as follows: (8 Marks) (12+8=20Marks) Sata Ltd is a shoe manufacturer who has an operating profit of $25 per pair on selling price of $143 per pair. Sata Ltd is currently producing 6,000 pairs per annum which is 60% of the practical capacity. The cost per pair is as follows: ACCT1064 Final Main Assessment (Melbourne), Semester 1, 2020 Page 2 of 4 Downloaded by litile alasadi__(valasadi 123ggmail com) For the next year the manufacturer estimates the demand to remain at 6,000 pairs per annum. The manufacturer also anticipates that the fixed overheads to go up by 10% while the rate of direct labour and direct materials will increase by 8% and 6% respectively. The company incurs other fixed costs of $12,000 per annum which do not form part of the product costs. Due to the intense competition, Sata Ltd will not be able to increase the selling price of the shoes next year and will continue to sell the shoes at $143 per pair. Sata Ltd is approached by a large retailer to supply shoes on a onetime only special-order basis equating to 20% of practical capacity. Sata Ltd would like to earn an overall profit of $167,300 next year. Required: (a) Prepare marginal costing income statements showing operating profit for Sata Ltd. (from regular demand of 6,000 units per annum) for the current year and for the next year. (9.5 Marks) (b) Determine the minimum price per pair of shoes at which you would recommend Sata Ltd to accept the one time only special order? (5.5 Marks) (9.5+5.5=15 Marks ) Question 3 Tsunamy Ltd, is a leading home appliances manufacturer. The company uses just-in-time manufacturing processes and holds no inventory. Manufacturing is done in batches of 150 units each which cannot be altered without significant cost implications. Although the products are produced in batches of 150 units, they are sold as single units at the market price. Due to fierce competition in the market, the company is forced to follow market price for each product. The following table provides the financial results of its four unique products: Since the company is concerned about loss in manufacturing and selling of two products, it has approached you to get a clear picture on its products and costs. You have conducted a detailed analysis whose findings are below: The overhead absorption rate of $2 per machine hour has been used to allocate overheads into the above product costs. Further analysis of the overhead cost shows that some of it is ACCT1064 Final Main Assessment (Melbourne), Semester 1. 2020 Page 3 of 4 Downipaded by uttie alosadi _ (vabadit23ggnail con) caused by the number of machine hours used, some is caused by the number of batches produced and some are product specific fixed overheads that would be avoided if the product were discontinued. Other general fixed overhead costs would be avoided only by the closure of the factory. Numeric details are summarised below: caused by the number of machine hours used, some is caused by the number of batches produced and some are product specific fixed overheads that would be avoided if the product were discontinued. Other general fixed overhead costs would be avoided only by the closure of the factory. Numeric details are summarised below: The other relevant information is as follows: Required: (a) Prepare a profitability statement that is more useful for decision making than the profit statement prepared by Tsunamy Ltd. (9 Marks) (b) Calculate the break-even volume in batches and also in approximate units for each of the four products. (6 Marks) (9+6=15 Marks )