Question 1 Dang Inc. produces and sells two products; PI and PH. The company's accounting system works with three direct cost categories (direct material, direct labor and machine cost) and one pool of manufacturing overhead (indirect manufacturing costs]. Dang Inc. employs an "Actual Costing" system, where overhead is allocated to the products based on (the use of) machine hours. Products are priced based on the unit costs calculated in the accounting de- partment. The following data are available for the recent financial year: Table 1: Dang Inc. (Amounts in DKK) PI: PH: Production and sales - number of units 3,200 1,800 Sales price per unit 1,500 2,700 Direct materials per unit 275 405 Direct labor cost per hour 160 160 Direct labor hours per unit 2.4 3.6 Machine hours - cost per hour 75 75 Machine hours per unit 1.5 2.5 Actual manufacturing overhead 3,487,500 Question 1.1 Calculate the manufacturing overhead (indirect cost) rate, using machine hours as the cost-allocation base. Calculate the unit costs for the two products, calculate total costs per product and calculate the gross margin percentage per product as well as in total. Dang Inc. experiences severe competition in the market for PI, whereas competition in the market for PH seems almost non-existent. Dang Inc. is in doubt concerning the unit costs calculated above and has thus collected the fol- lowing data. Table 2: Dang Inc. PI: PH: Production series - numbers 60 240 Inspections of production - numbers 20 180 Quality tests - numbers 110 390 Technical support - number of hours 400 1,600 The following table displays total overhead associated with the above activities:Table 3. Dang Inc. Activities and costs Activity: Manufacturing Overhead Production series 1,500,000 Inspections of production 600,000 Quality tests 585,000 Technical support 802,500 Question 1.2 How could Dang Inc. employ the above information to allocate manufacturing overhead to products using an alternative method? Calculate unit costs as well as total costs per product if Dang Inc. decides to use the alternative method you suggested. Calculate the gross margin percentage per product as well as in total. Question 1.3 Comment on the results you found in questions 1.1 and 1.2. Question 2 Divad Inc. is a medium sized production company, which produces a single product called L44 for government organizations in Western Europe and Turkey. Divad Inc. is using standard costing for cost control and inventory valuation. First-in-first-out (FIFO) is used for inventory valuation. Divad Inc. Uses two direct manufacturing cost categories; direct material and direct labor. When allocating manufacturing overhead (indirect manufacturing costs) Divad Inc. is using standard direct labor hours as the cost-allocation base. This holds for variable as well as fixed manufacturing overhead. The following standards have been developed by Divad Inc. at the beginning of 2019 and are valid/used throughout 2019: Direct Labor; 22 hours per unit of L44, at DKK 250.00 per direct labor hour. Direct Material; 260 kg per unit of L44, at DKK 25.00 per kg. Overhead is allocated as follows: Variable manufacturing overhead: DKK 50.00 per direct la- bor hour. Fixed manufacturing overhead: DKK 75.00 per direct labor hour. Direct labor hours were budgeted at 10,000 hours per month. This is also used as the alloca- tion base for manufacturing overhead.During October Divad Inc. manufactured 500 units of L44. The following entries pertaining to October were made in the accounting system. " Direct material acquired and used: 127,000 kg, at DKK 26.25 per kg. "Direct manufacturing labor cost: 10,800 hours, at DKK 236.00 per hour. " Actual manufacturing overhead costs incurred: DKK 1,390,000.00 (of this variable man- ufacturing overhead constituted DKK 502,500.00). The beginning of October finished goods inventory was 80 units of L44 - these were manufact tured during September. 550 units of L44 were sold during October. Total revenue from the sale of L44 amounted to DKK 11,000,000. Budgeted sales price per unit was DKK 20,000 per unit. Question 2.1 What are total budgeted (standard) manufacturing costs to produce L44 in October (per unit and in total). Question 2.2 Explain the concept of flexible budgeting and prepare the flexible budget for October (for Divad Inc.). The flexible budget must show budgeted manufacturing costs and budgeted profit. Question 2.3 Explain the ideas behind variance analysis and explain how Divad Inc. may benefit from such analysis. Question 2.4 Prepare a thorough variance analysis for the direct cost categories and briefly com- ment on the results. Question 2.5 Prepare a thorough variance analysis pertaining to overhead (indirect costs) and briefly comment on the results. Question 2.6 Prepare an income statement for October - you can of course only include manufacture ing costs (i.e., ignore period costs)