Waterloo Storage Products makes a four-drawer plastic storage cabinet on casters meant for use in garages and workshops. Each cabinet sells for $ 35. Data for last year’s operations follow:                     

Units in beginning inventory………………………	0
Units produced……………………………………….	25,000
Units sold…………………………………………….	21,500
Units in ending inventory……………………………	3,500
Variable costs per unit:
Direct materials…………………………………….	$ 8
Direct labour……………………………………….	10
Variable manufacturing overhead…………………	2
Variable selling and administrative………………..	4
Total variable cost per unit………………………	$ 24
Fixed Costs:
Fixed manufacturing overhead…………………….	$ 75,000
Fixed selling and administrative…………………...	110,000
Total fixed costs…………………………………….	$ 185,000

1. Assume that the company uses variable costing.

Compute the unit product costs for one storage cabinet.

1. What is the company’s break-even point in terms of units sold?

1. Assume that the company uses absorption costing.

Compute the unit product cost for one storage cabinet.

Question 2 -

The direct materials and direct labour standards for one bottle of Clean-All spray cleaner are given below:

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost
Direct Materials	6.0 millilitres	$ 0.25 per millilitre	$ 1.50
Direct Labour	0.2 hours	$ 12.00 per hour	$ 2.40

During the most recent month, the following activity was recorded:

1. 20,000 millilitres of material was purchased at a cost of $ 0.20 per millilitre.
2. All of the material was used to produce 3,000 bottles of Clean-All.
3. 625 hours of direct labour time was recorded at a total labor cost of $ 7,500.

Required: A) Compute the direct materials price and quantity variances for the month.

B) Compute the direct labour rate and efficiency variances for the month.

Question 3 –

The Centrico Medical Laboratory, a government-sponsored charity, is located on the island of Ste.Lucretia. The laboratory has just finished its operations for September, which was a particularly busy month due to a chemical spill that affected a few neighbouring small islands, causing many illnesses, The chemical spill and contamination largely bypassed Ste.Lucretia’s water supply, but residents of Ste.Lucretia willingly donated supplies and the laboratory assisted in the medical testing to help people on other islands, As a consequence, the medical laboratory collected and processed over 25% more laboratory samples from potentially ill residents than had been originally planned for the month.

A report prepared by a government official comparing actual costs to costs included in the static budget for the medical laboratory appears below (The currency) in Ste.Lucretia is the East Caribbean dollar). Continue support from the government depends on the lab’s ability to demonstrate control over its cost:

CENTRICO MEDICAL LABORATORY Cost Control Report For the Month Ended September 30

			Static
		Static	Budget
	Actual	Budget	Variance
Laboratory samples collected	920	700	220
Variable costs:
Medical supplies	$14,878	$10,640	$4,238
Lab tests	16,173	12,915	3,258
Refreshments for staff and volunteers	1,779	1,435	344
Administrative supplies	284	490	(200)
Total variable cost	33,114	25,480	7634
Fixed costs:
Staff salaries	19,800	19,800	0
Equipment depreciation	3,150	2,850	360
Rent	2,250	2,250	0
Utilities	486	450	36
Total fixed cost	25,686	25,350	336
Total Cost	$58,800	50,830	7970

The managing director of the medical laboratory is very unhappy with this report, claiming that his costs were higher than expected due to the emergency on the neighbouring islands. He also points out that the additional costs were fully covered by payments from grateful recipients on the other islands. The government official who prepared the report counters that all of the figures were submitted by the medical laboratory to the government; he was just pointing out that actual costs were considerably higher than promised in the budget.

Required: A) Prepare a new performance report for September using the flexible budget approach (Note: Even though there are no revenues in this setting, the flexible budget approach can still be used to prepare a flexible budget performance report).

B) Do you think any of the variances in the report you prepared should be investigated? Which one if any and why?