ABC Company (ABC) is a company that manufactures bill boards which is based in Ondangwa. The owner
Question:
ABC Company (“ABC”) is a company that manufactures bill boards which is based in Ondangwa. The owner of ABC has little accounting background but due to budget constraints they are not able to hire a fully qualified management accountant. The owner of ABC has hired you as a management accounting intern and has provided you with the following information:
| N$’000 | |
| Salaries | |
| Factory workers (1) | 61 000 |
| Factory management (2) | 55 000 |
| Accounting | 10 000 |
| Directors | 40 000 |
| Depreciation (3) | |
| Factory equipment | 10 000 |
| Office equipment | 2 200 |
| Buildings | 3 500 |
| Purchases from creditors | |
| Raw material | 95 000 |
| Water and electricity (4) | |
| Factory | 22 000 |
| Storeroom | 3 000 |
| Office | 4 000 |
| Other | |
| Cleaners (office) (fixed rate as per contract) | 1 800 |
| Entertainment (amount is spent every year) | 600 |
| External audit fees as per contract | 1 500 |
Additional Information:
1. Factory workers are paid based on the hours worked.
2. Factory management is employed as permanent employees who are paid a fixed salary irrespective of the hours worked.
3. All the assets are depreciated on the straight line method over the useful life of the asset, except delivery vehicles whose depreciation is based on the number of kilometres travelled. The number of kilometres travelled is roughly proportionate to the production volume. There are three buildings on the premises – the factory building, the storeroom where the raw materials are store and the administration building.
4. The water and electricity of the storeroom and the office is the same from one month to the next irrespective of any change in the number of units sold or produced. N$3 000 of the water and electricity of the factory is not influenced by the number of units produced.
| REQUIRED: | ||
| 1.1 | For each cost above, indicate whether it is a direct, indirect or period cost as well as whether it is fixed or variable. | |
| [(Please present your answers in a table format and mark the appropriate column by way of a (X)] for example: Cost Direct Indirect Period Variable Fixed Salaries X X | ||
Expert Answer:
