The following balances refer to the workshop of the Casablance Engineering Company for the half year ended 31 December Year 6. $ Inventory at 1 July Year 6: Raw materials Work in progress Finished goods Direct factory wages Indirect factory wages Licence fees paid to patent holder Heating and lighting General factory expenses Insurance on plant Rates on factory premises Purchases of raw materials Raw materials returned to suppliers Plant at cost Depreciation provision: plant Inventory at 31 December Year 6 Raw materials Finished goods Market value of goods completed 7 566 16 989 12 716 39 264 26 076 15 440 4 506 12 710 5 274 3 244 135 556 1 652 65 280 26 112 6 354 10 034 350 000 Note 1. Licence fees are to be treated as a direct expense 2. Expenses owing at 31 December Year 6 were: Direct wages $580: indirect wages $666; general expenses $223. 3. Expenses prepaid at 31 December Year 6 were: Insurance $422; rates $274; heating and lighting $156. 4. Plant is to be depreciated at the rate of 5 per cent on cost of the period. REQUIRED a. Show the manufacturing account for the six months ended 31 December Year 6, assuming that closing work in progress is valued at 5 per cent of full factory cost inclusive of work in progress b. Given that the production capacity of this factory only totals 30 000 units a month. What advice would you give to the management if there was a sudden increase in demand which outstripped their production capacity? How could such an increase in demand be met? Discuss