QUESTION $1(45$ marks$)$ Mbali Creations $($Pty$)$ Ltd manufactures high$-$quality leather handbags. The company has a $31$st March financial year$-$end. The direct materials used in the manufacturing process are leather, fabric lining, metal hardware, and bubble wrap. The manufacturing process occurs in three production departments as follows: Production Department $1($Leather and Fabric Preparation$)$: Large sheets of leather are cut into smaller pieces according to the handbag design. The pieces are then treated and dyed to achieve the desired colour and texture. Each piece is inspected for quality before being transferred to the assembly department. Rolls of fabric are cut into pieces that will be used as the lining for the handbags. The fabric pieces are sewn together to form the interior compartments and pockets of the handbags. The completed fabric linings are transferred to the assembly department. Production Department $2($Assembly$)$: The prepared leather pieces and fabric linings are stitched together to form the body of the handbag. Metal hardware such as zippers, buckles, and handles are attached. The assembled handbags are then inspected for quality, and any necessary adjustments are made. Production Department $3($Finishing$)$: The handbags are cleaned and polished to ensure they meet the company's high standards. Glue is applied to the brand logo and attached to each handbag. The completed handbags are then covered in bubble wrap for shipping. Direct materials: The leather used for the handbags is imported from India at R$120$ per square meter $($m$^2),$ with each handbag requiring $1,5$ m$^2($square meters$)$ of leather. Fabric lining is locally sourced at R$190$ per $10-$ metre roll, and each handbag uses $150$ centimetres of fabric. Metal hardware costs R$82$ per set in a packet, with one set in a packet required per handbag. The bubble wrap used for packing costs R$130$ per $50-$metre roll, and each handbag requires $250$ centimetres of bubble wrap. These prices were fixed for the financial years ending $31$ March $2024$ and $31$ March $2025.$Direct labour and production overheads: The handbags take $3$ hours each to manufacture. The current direct labour cost rate is R$28,50$ per hour. Variable overhead costs are apportioned to production at a rate of R$35$ per handbag manufactured. Fixed overhead costs are absorbed at a plant$-$wide rate of R$19,50$ per direct labour hour.Actual overheads and direct labour hours worked for the financial year which ended on $31$ March $2025$ were as follows: Month Variable Overheads $($R$)$ Mixed Overheads $($R$)$ Fixed Overheads $($R$)$ Total Direct Labour Hours $($DLH$)$ April $20247836381012106802$ May $20248700382312450876$ June $20249016385212340908$ July $20249355379912567945$ August $20249782384012709980$ September $2024111043958129051104$ October $20248486378912698859$ November $20247301390712965751$ December $20244387322612876485$ January $20256650371513105686$ February $20259058384312993912$ March $20258321386012938842$ Total $999964542215265210150.$ Mixed costs show a strong positive correlation with direct labour hours worked. The company uses a FIFO method of inventory valuation. During the year $2900$ handbags were started and completed. All the handbags manufactured were sold at R$565$ per handbag. There was no opening or closing inventory of work$-$in$-$progress and finished goods. Other opening and closing inventories were as follows: Opening inventory $1$ April $2024$ Closing inventory $31$ March $2025$ Leather $485$ m$^2530$ m$^2$ Fabric lining $65$ rolls $80$ rolls Metal hardware $280$ packets $310$ packets Bubble wrap $18$ rolls $10$ rolls.FINANCIAL YEAR ENDING $31$ MARCH $2026$ For the financial year ending $31$ March $2026,$ all prices except those of leather and metal hardware will remain unchanged. Due to the declining value of the rand, the cost of leather is expected to increase by $5\%$ in the financial year ending $31$ March $2026.$ Additionally, Mbali Creations $($Pty$)$ Ltd plans to switch to higher$-$quality metal hardware, which will cost R$96$ per set. The direct labour cost rate is expected to increase to R$30,50$ per hour in the financial year ending $31$ March $2026.$ The production overhead absorption rates will remain the same in the financial year ending $31$ March $2026.$ Anticipated sales for the financial year that will end on $31$ March $2026$ are $3050$ handbags. Planned production for the financial year that will end on $31$ March $2026$ is $3200$ handbags. It is estimated that the following purchases of direct materials will be made during the financial year that will end on $31$ March $2026$: Leather $4600$ m$^2$ Fabric lining $460$ rolls Metal hardware $3950$ packets Bubble wrap $190$ rolls.Required $1\mathrm{.}1$ Mbali Creations $($Pty$)$ Ltd uses a normal costing basis to measure input costs. Briefly explain why this method is the most suitable for the company. $(2)1\mathrm{.}2$ Would the glue used to affix the brand logo be classified as indirect materials or consumables? Motivate your answer.