SECTION A [50 MARKS] Answer ALL questions in this section.

QUESTION 1 [4 MARKS] Identify and explain two advantages of marginal costing over absorption costing.

QUESTION 2 [8 MARKS] Identify and explain four assumptions of the economic order quantity.

QUESTION 3 [10 MARKS] Bonaventure Manufacturing expects to earn P210,000 next year after taxes. Sales will be P4million. The firm manufactures a combined bookshelf and desk unit used extensively in university dormitories. These units sell for P200 each and a have variable cost per unit of P150. Bonaventure experiences a 30% tax rate. a. Determine the firms fixed costs that are expected next year. (4 marks) b. Calculate the firms break-even point in both units and pulas. (6 marks)

QUESTION 4 [8 MARKS] The following results are available for Division X and Y:

	Division X	Division Y
Profit before interest and tax	P185 000	P172, 000
Capital employed	P1, 540, 000	P1, 650, 000

The cost of capital is 10%. Calculate and comment on the performance of the departments based on: a. Return on capital employed (4 marks) b. Residual income (4 marks)