Question 2 (20 marks) Colonial Tap Company (CTC) is a manufacturer of taps and fittings for the plumbing trade, located in Brisbane. The company was established by Ken Hall in 1951, with a workforce of 10, to meet the needs of the postwar housing boom. Its product range was fairly limited but the company had an excellent reputation for quality. Nowadays, CTC manufactures an extensive range of high quality brass and chrome taps. The company is managed by Ken's son, Michael, and employs 20 people. It has annual sales averaging approximately $1 million. Although it has been consistently profitable, CTC has experienced increasing pressure from competitors since the early 2000s. The company uses a cost-plus approach to pricing but is having to reduce its markup constantly in order to maintain market share. Both Ken and Michael qualified as engineers. The business is small and has never been able to employ an accountant. Instead, a bookkeeper calculates monthly profit as sales revenue minus expenses. prices are based on rough estimates of cost of direct material and direct labour inputs plus a 50 per cent markup. With the decline in profit and constant pressure on prices, Michael began to feel uneasy about the way costs and profits were calculated. The results for the month just ended were: Sales $980 000 Less Expenses: Materials purchased $300 000 Factory wages-production line 250 000 Production supervisor's salary 35 000 Rent 80 000 Council rates 5 000 Sales staff 110 000 Advertising 18 000 Equipment depreciation 25 000 Electricity 12 000 Mananer's salary 8n non