QUESTION 3
a) SANTA LTD. submits the following information on 31st March, 2020:
Particulars Sales for the year Purchases of material for the year Direct labor Inventories at the beginning of the year Finished goods Work-in-progress Materials inventory At the beginning of the year
Amount (USD)
5,500,000 2,200,000 1,300,000
140,000 80,000
60,000
3
At the end of the year
80,000
Inventories at the end of the year Work-in-progress Finished goods Additional information:
120,000 160,000
-Manufacturing overheads were 60% of the direct labor cost
- Administration expenses were 5% of sales.
- Selling & distribution expenses were 10% of sales.
Required: Prepare a Cost Sheet with all elements?
b) MODERN LTD. has three departments X, Y and Z, each of which makes a different
product. The budgeted data for the coming year are as follows (USD):
Department Y 1,120,000 140,000 140,000 140,000 280,000
Particulars x Z Sales 2.240,000 1,680,000 Direct materials 280,000 280,000 Direct labour 112,000 448,000 Direct expenses 280,000 560,000 Fixed cost 560,000 560,000 The management of the company is considering closing down department 'Z'. There is a
possibility of reducing fixed cost by $150,000 if department 'Z' is closed down. Advise the
management whether or not department 'Z' should be closed down?
