Special machine depreciation 10,000 Administrative expenses 35,000 Compute the following costs for the month ended 31 August 2017: a. Prime costs b. Production overhead c. Period costs (6 marks)
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4 QUESTION 4 [MAF451 JAN 2018] CIMA defines cost as “the amount of expenditure (actual or notional) incurred on, or attributable to, a specified thing or activity”.Required: a. Explain briefly the following items. i. Direct cost ii. Indirect cost iii. Conversion cost (3 marks) b. Sour Sweet Sdn Bhd is a manufacturer of a variety of frozen doughnuts such as chocolate-heaven doughnuts, strawberry-burst doughnuts and vanilla-smooth doughnuts. Below are the costs incurred by the company for January 2018: Cost Item Flour 20 bags of flour at RM55 per bag Sugar 15 bags of sugar at RM70 per bag Other direct materials RM1,500 The wages of production workers RM1,200 per worker per month for 5 workers Supervisor’s salaryRM1,700 per month Depreciation expense of machinery RM2,400 per year Administrative expenses RM1,500 per month Classify the above costs into the following categories: i. Prime costs per month ii. Fixed costs per month (7 marks)