Part A (8 Marks)

Presented below are Bread Emporium Ltds monthly costs and expenses data relating to its bakery products:

Flour used in baking bread	$165 300
Rate fees on bakery building	6500
Advertising costs paid to promote gluten free bagels	32 000
Wages of bakers	75 000
Salaries of bakery manager and security guard	9000
Depreciation on bakery equipment	15 000
Depreciation on delivery vans	5000

Required:

From the above information, calculate the total amount of:

(a) Prime cost (2 Marks)

(b) Manufacturing overhead (2 Marks)

(c) Conversion cost (2 Marks)

(d) Period cost (2 Marks)

Part B (12 Marks)

James Ltd manufactures 6.6kW solar panels. Unit data for 6.6kW solar panel model are as follows:

	Solar panel model
Selling price	$2100
Variable costs and expenses
Direct materials	350
Direct labour	250
Manufacturing overhead	500
Selling and administrative	370
Total variable costs and expenses	$1470

The fixed costs are: manufacturing overhead $200 300, and selling and administrative expenses $90100.

Required:

(a) Calculate the contribution margin ratio for the solar panel model. (3 Marks)

(b) Calculate the break-even point in dollars for the solar panel model. (3 Marks)

(c) i) Calculate the margin of safety ratio assuming that the company expects to sell 520 solar panels from the 6.6kW model. (2 Marks)

ii) Discuss how managers of James Ltd use this margin of safety ratio information to manage the profitability of the solar panel model? (4 Marks)

(Total 20 Marks)