Question 2 (SHOW YOUR WORKINGS FOR EACH SECTION)

Shoostar Ltd is a video tech company that produces videos for companies' marketing campaigns and video training content. All jobs are tailor-made to the clients' requirements. The company uses a job costing system, and had 2 jobs in process at the start of the year: Job S1 ($66 000) and Job S3 ($55 000). The following information is available:

(i) The company applies manufacturing overhead based on video production hours. Budgeted overhead and video production activity for the year were anticipated to be $800 000 and 40 000 hours, respectively.

(ii) The company worked on four jobs during the first quarter (i.e., from 1 July to 30 September). Direct materials used, direct labour incurred and video production hours were as shown in the following table:

Job numbers	Direct material	Direct labour	Video production hours
S1	$ -	$40 000	500
S2	50 500	23 000	1000
S3	-	65 000	1 500
S4	30 000	$40 000	2 000

(iii) Manufacturing overhead incurred during the first quarter was $385 000.

(iv) Shoostar Ltd completed Job S1, and Job S3 during the first quarter. Job S1 was sold on credit, producing a profit of $60 000 for the company.

Required:

a) Calculate the company's predetermined overhead rate.

b) Calculate manufacturing overhead applied to production for the first quarter.

c) Determine the cost of jobs completed in the first quarter.

d) Determine the cost of goods sold at the end of the first quarter.

e) Can a company use both job order costing and process costing? Why or why not?

Question 4 (SHOW YOUR WORKINGS FOR EACH SECTION)

Below are data from Peekay Chewing Gum Company's operating budgets. The company's financial year ends on 30 June

	Quarter 1	Quarter 2
Sales	$248,470	$251,539
Direct material purchases	120,295	128,832
Direct labor	76,500	74,000
Manufacturing overhead	28,000	25,400
Selling and administration expenses	33,500	33,500
Collection from customers	230,500	220,000
Cash payments for purchases	114,000	118,000

Additional data:

Equipment was sold in July for $9,000 and $5,500 in November. Dividends of $6,500 were paid in August. 20% of the selling and administration expenses relate to depreciation expenses. The beginning cash balance was $80 000 and a required minimum cash balance per quarter is $60,000.

The company has a 15% open line of credit for $70 000 with their bank.

Required:

a) Use this information to draft a cash budget for the first two quarters of the year.

b) Briefly comment on Peekay Chewing Gum Company's expected cashflow position in the first two quarters of the year.

c) Explain how a flexible budget can overcome the weakness of a static budget.

Question 5 (SHOW YOUR WORKINGS FOR EACH SECTION)

Oriental furniture's makes three types of quality wooden furniture. Information for these three products is shown below:

	A1	A2	A3	Total
Selling price per unit	$200	$500	$1 000
Variable cost per unit	$60	$250	$600
Expected unit sales (annual)	15,000	7,000	2,000	24,000
Sales mix	60 percent	30 percent	10 percent	100 percent

Total annual fixed costs are $4,000,000. Assume the sales mix remains the same at all levels of sales.

Required:

a) Calculate the weighted average unit contribution margin, assuming a constant sales mix.

b) How many units of each furniture type must be sold to break even?

c) Calculate in sales units the margin of safety for Oriental furniture's, assuming projected sales are 24 000 units?

d) Suggest two ways Oriental Furniture can improve its margin of safety?

Note: Please Provide solutions in the same order as questions are asked.