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3 marksCost Elements, Classification and Cost Curves

CAPE Accounting Unit 2 · 2017 · Paper 2 · Question 1(b)(ii)

Orchid Enterprise received a special order offer to purchase 2 000 units at 200 each. The normal selling price is 380, and unit cost details are: Direct material 80, Direct labour 50, Factory overhead (60% variable) 90, Selling and administrative expenses (25% fixed) 40. Idle capacity is available.

Should the company accept the special order? Justify your answer.

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Other parts of this question

  1. 1(a)Prepare a schedule of the cost of goods manufactured for the year ending 31 December 2016.[17 marks]
  2. 1(b)(i)Identify the unit costs which will be relevant to the decision to be made by Orchid Enterprise and calculate the total unit cost.[5 marks]
  3. 1(c)(i)Compute the value of the closing inventory of raw materials for March 2016 using the First-in, first-out (FIFO) method.[3 marks]
  4. 1(c)(ii)Compute the value of the closing inventory of raw materials for March 2016 using the Average cost method.[3 marks]
  5. 1(d)List TWO principles of material control and give an example of EACH principle.[4 marks]

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