Section A (31%) - Compulsory Essay and Calculation Questions Question Al Four grams of orange are need for each bottle of Orange Juice. The cost of orange is $3 per gram. Budgeted production of Orange Juice is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 First Second Third 40.000 50.000 60.000 Year 3 First 70,000 Fourth 80.000 Budgeted production in bottles Orange Juice is the usual ingredient and it is necessary to carry large inventories as a safety against stock-outs. For this reason, the inventory of orange at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 20,000 grams of orange will be on hand to start the first quarter of Year 2 Required: Prepare a direct materials budget for orange by quarter and in total, for Year 2. (12 marks) Question A2 Europe Company Limited produces and sells harddisk. The following data refer to the year just completed: Units Beginning inventory 0 Produced 68,000 Sold 54,000 Net operating income under variable costing is $3,800,000. Fixed manufacturing overhead incurred for the above production process totalled $272,000. Required: (a) Compute the units which make the difference in the two systems (Variable costing and Absorption costing) (1 mark) (b) Compute the manufacturing overhead cost per unit which makes the difference in the two systems (1 mark) (c) Use vertical 1 column and 3 rows schedule to compute the variances between the variable costing and absorption costing net operating income figures. (4 marks) Page 3 of 11