Tom used to run his own business, a small caf in the East of Singapore. Last year, due to water damage from a flash flood, not only did he lose a substantial part of his inventory; but his caf also sustained damages. In order to carry on the business, he sold the caf to his friend, Bill, who invested money to replace/repair damaged shop fixtures and machines, and to purchase new inventory. The small caf offers coffee and tea, and light food snacks bought from outside suppliers. The snacks are heated up in the caf and served. There is only one other worker, a waiter. Tom is now the manager. Between the two of them, they make drinks, serve customers, and clean up. When he was running his own business, Tom did not receive a salary. Now he is paid $2,500 per month. The waiter is paid $1,000 a month. They both work from 9 am to 8 pm, six days a week. Tom is also in charge of purchasing for the caf. In the past, he bought inventory in bulk to get a lower price. However, as the inventory is perishable, it often spoils and at the end of each quarter about 30% is thrown away. This spoilage cost has been factored into the cost of ingredients per set. The caf sells drink & snacks in a set. The average ingredient costs for each set is $2.20 and it is sold at $4 per set. Rent and utilities average $2,500 per month. The business uses the number of sets as an allocation base for its overhead costs. The budgeted sales for the next five quarters for the caf are stated below:

No. of sets Quarter 1 of 2018 11,200 Quarter 2 of 2018 12,400 Quarter 3 of 2018 22,600 Quarter 4 of 2018 25,800 Quarter 1 of 2019 14,400

Apply normal costing and compute the product cost for a typical set (hint: fixed costs should be allocated using an appropriate predetermined overhead rate)