1. Examine the classified costs data of Cooper Ltd shown below.

1. £ Direct materials opening inventory 2,500 
2. Direct materials purchases 20,000 
3. Direct materials closing inventory 3,750 
4. Direct labour 40,000 Direct expenses 10,000 
5. Indirect production overheads 155,000 
6. Work-in-progress opening inventory 5,625 
7. Work-in-progress closing inventory 4,375 
8. Sales 406,250 
9. Finished goods opening inventory 10,625 
10. Finished goods closing inventory 12,500 
11. Indirect non-production overheads 133,125

Required: 

a) Calculate production prime costs.

 b) Calculate Factory Cost

 c) Calculate Gross Profit

 d) Calculate Net Profit

 Note: show all workings.

Question 2. A business manufactures a single product with a selling price of £21 and variable unit costs of £7. Period fixed overheads are £4,942 per month. Current production levels are 700 units per month (at 80% capacity). A customer has offered to buy up all of the business spare capacity for £3,220. 

Required: 

Evaluate the customer’s offer from financial viewpoint and discuss whether they should accept or reject the special offer.

 Note: show all workings.