Due Date: Session 5.2 The accountant atABC Company has prepared the following manufacturing data relating to
201? for use in cost analysis by management accounting recruits. The company produces
canned food that requires 45 machine hours and 3 directlahour hours per unitto
produce. Total budgeted production output for 2017 is 50,000 units a City West water monthly bill, computed as follows First 7,000 litres or less $1,000 flat Fee Next 500 litres $0.004 per litre used
Next 500 litres $0.008 per litre used
Next 500 litres $0.012 per litre used. etc. Assume each product requires a standard quantity of 1.8 litres ofwater. h. lease on machinery in use. where a minimum monthly charge of$1,500 is paid for up
to 10,000 hours ofrnachine time. After the first 18,000 machine hours an additional charge
of $3.50 per machine hour is paid up to a maximum total lease charge of $4.000 per month. r. Rental expense on factory bulldlng donated by the city, where the agreement calls for a
fixed annual fee (IFS 120,000 unless 145,000 labour—hours or more are worked. in whlch
case no rentneed to be paid. d. Straight line depreciation on equipment owned by ABC Company amountto $34,107.95
for the year. e. The budgeted costs for direct materials and dlrectlahour are based on the following
standards for 201'}. Each product requires 10 Kgs oflnput at a costofS'l'fiD per Kg. Also, it
takes 3 directlahour hours to complete one productand the average houdy rate is $15. 5. The costfor energy is notyet known. However, the accountanthas assembled the
following annual data related to the past five years. In this regard. the challenge fat-Jug the
accotmrant Is to calculate energy cost given the cost nature as presented below. —%
_— mm Hmflll on 211111? Page | 1 CAMBRIDGE INTERNATIONAL COLLEGE U U I Ii A L l A Required: 1. Assuming energy is semi—variable cost, classify each of the above cost items (Le, 'a‘ to
1‘] according to their cost behaviour as variable. step—variable, committed fined.
discretionary fixed, step-fixed, or semi-variable. Show the neoessary computations to support your answer. 6 Marks 2. Calculate the estimated {1} total production cost and [ii] product cost per unit for
2011I assuming total production amounted to 50,000 unlts. 10 Marks 3. Calculate the number of units that the company should produce and sell in order to
brealneven during 201'}. Assume the sales price per unit is $140. 12 Marks 4. ‘0utslde of the relevant range. cost behaviour patterns may not hold.’ Explain What this
statement means and support your answer with one example for variable costs and one example for flmed costs. (Hence: this part requires prop-er referencing when published
resources are used so as to avoid plagiarism.) 2 Marks
{1 Mark will be reduoed if format of presentation is poor: such as lack ofcla rity, neatness,
completeness, no detailed computations presented, etc.) 6 D "IL

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