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Shine Detergent (M) Sdn. Bhd. produces a special type of detergent for heavy industrial use in Malaysia. The following information was provided by the company for theSecond Quarterof 2019:

Per unit:

RM

Selling price

80

Production costs:

Direct materials

20.00

Direct labour

12.00

Variable factory overheads

4.00

Fixed selling costs per quarter

300,000

Fixed production costs per quarter

270,000

Actual details for the months are as follows:

April

May

June

Production in units

120,000

131,600

128,000

Sales in units

112,000

119,200

120,800

Additional information:

(i)The opening inventory on 1 April 2019 was 21,000 units.

(ii)All the fixed costs would be increased by 40% for the entire second quarter respectively.

(iii)Fees paid for sales brochure (variable administration cost) will increase 30% when total unit sales exceed target110,000units, and 40% when exceed target115,000.

(iv)The management will reward the sales staff with 10% of sales bonus when target115,000units is achieved.

(v)The administration costs and sales bonus will be calculated based on percentage of total sales values for each month.

Required:

construct an income statement for each of the three months ended 30 June 2019, using marginal costing method.(19.5 marks)

Part Two

The factory has the policy of giving out RM100 coupon to each of the workers every month. The management forecasts that the coupon amount will be increasing steadily by 15% every year as the production capacity continues to moderately increase over the next 3 years.

Required:

Identify and describe the type of cost behavior of the coupon in both short term and long term with simple chart(s).(6 marks)

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