Question $1(26$ marks$)$

Pastry Trend$$s main product is the cheesecake cupcake. Each cupcake uses $0\mathrm{.}04$ kg of cream cheese which is currently purchased quarterly. The company sells a cupcake for $$500$ each which includes a margin of $25\%$ each. Quarterly demand of each cupcake is $250,000$ units.

To place each order, the entity designates a single employee who is paid at a rate of $$30$ per hour. Each order takes five hours. While, on the other hand, the cost of holding each unit of inventory is $0\mathrm{.}4\%$ of the unit price of the cream cheese. The unit price of the cream cheese is $50\%$ of the cost to make the cheese cake.

The financial controller was advised by the main supplier that a $2(1)/(2)\%$ discount would be obtained if Pastry Trend doubles its current lot size. On the other hand, a $5\%$ discount would be given if Pastry Trend triples its current lot size. Meanwhile, if Pastry Trend decides to order four times the current lot size, they would receive a $7(1)/(2)\%$ discount.

Required:

$($a$)$ Calculate the EOQ based on the formula. $(5$ marks$)$

$($b$)$ Calculate the total cost based on the EOQ. $(4$ marks$)$

$($c$)$ Calculate the total cost for each alternate order including the current policy. $(16$ marks$)$

$($d$)$ Which order quantity is considered the optimal order quantity and why? $(1$ marks$)$

Question $2(32$ marks$)$

Enes Inc. is the main manufacturer of multicolour headbands in Western Jamaica. The following budgeted data relates to Enes Inc. for two periods: December $31,2022$ and December $31,2023.$

Dec. $2022$ Dec. $2023$

Production $($units$)54,00067,000$

Sales $($units$)62,00073,000$

Opening stock $($units$)30,00022,000$

The company incurred direct material and labour in addition to production and selling overheads per unit for both years as follows:

Direct material $$300$ Variable production overheads $$250$

Direct labour $$420$ Variable selling and distribution $$220$

The annual fixed production overheads are budgeted to be $$900,000$ and the company expects to produce $50,000$ headbands each year. Overheads are absorbed on a per unit basis. Actual fixed production overheads in $2022$ and $2023$ were $$960,000$ and $$1,230,000$ respectively. Actual fixed administration cost for both years was $$550,000$ per year with the selling price per unit being $$1,250.$

Required:

$($a$)$ Prepare the marginal costing income statements clearly showing the treatment of stock for

December $31,2022$ and $2023.(12$ marks$)$

$($b$)$ Prepare the absorption costing income statements for December $31,2022$ and $2023.$

$(16$ marks$)$

$($c$)$ Reconcile the income under both statements. $(4$ marks$)$ Question $3(41$ marks$)$

Paper Sweets Supplies Limited is located in Kingston. On the last balance sheet date, inventory amounted to $$12,500,000.$ The entity conducted a stock count with the aim of valuing inventory for financial statements purposes. The count along with the relevant invoices indicated that there were $2,500$ dairy$-$nut chocolate bars as at December $31,2022$ the last balance sheet date. Further investigations revealed that, this amount resulted from two different invoices. The following information relates to the $2,500$ chocolate bars:

Invoice Date Invoice Number Quantity Total cost

March $2,2022$ XY $15244,000$ $$800,000$

July $22,2022$ XY $20052,500$ $$550,000$

The inventory controller states that $60\%$ of the inventory as at December $31,2022$ relates to March $2,2022$ invoice, while, the remainder can be attributed to July $22,2022.$ However, the financial controller wants to ascertain the inventory balance as at December $31,2023$ for financial reporting purposes. The controller also understands that although the last$-$in$-$first out $($LIFO$)$ method is not allowed by the international financial reporting standards $($IFRSs$),$ it is acceptable by the US GAAP. Hence, although the company$$s policy is the average cost method, management wants to know the impact it has when used.

Below are data relating to the receipt and issue of dairy$-$nut$-$chocolate bars during the period ended December $31,2023$:

Date Receipt Issue Unit cost

Jan. $6,2023800$ $$450$

Feb. $10,2023700$ $$460$

Mar. $2,20231,000$ $$230$

Apr. $1,20231,400$ $$470$

Jul. $2,2023300$ $$485$

Aug. $20,2023900$ $$235$

Nov. $5,2023600$ $$490$

Required:

$($a$)$ Calculate the inventory value and profit for the period ended December $31,2023$ using

the company$$s current inventory valuation policy. $(14\mathrm{.}5$ marks$)$

$($b$)$ Calculate the inventory balance and profit for the period ended December $31,2023$ using the method acceptable by IFRS. $(14$ marks$)$

$($c$)$ Calculate the inventory value and profit for the period ended December $31,2023$ using

the method acceptable by the US GAAP. $(12\mathrm{.}5$ marks$)$ Question $4(30$ marks$)$

Mango Value Ltd is preparing its overhead budgets