Assignment Requirment

Colonial Tap Company (CTC) is a manufacturer of taps and fittings for the plumbing trade, located in Brisbane. The Company was established by Ken Hall in 1951, with a workforce of 10, to meet the needs of the post-war housing boom. Its product range was fairly limited but the company had an excellent reputation for quality.

Nowadays, CTC manufacturers an extensive range of high quality brass and chrome taps. The company is managed by Ken’s son, Michael, and employs 20 people. It has annual sales averaging approximately million.

Although it has been consistently profitable, CTC has experienced increasing pressure from competitors since the early 1990s. The company uses a cost-plus approach to pricing but is having to reduce its markup constantly in order to maintain market share.

Both Ken and Michael qualified as engineers. The business is small and has never been able to employ an accountant. Instead, a bookkeeper calculates monthly profit as sales revenue minus expenses. Prices are based on rough estimates of cost of direct material and direct labour inputs plus a 50% markup.

Get quality help now
checked Verified writer

Proficient in: Business

star star star star 4.7 (348)

“ Amazing as always, gave her a week to finish a big assignment and came through way ahead of time. ”

avatar avatar avatar
+84 relevant experts are online
Hire writer

With the decline in profit and constant pressure on prices, Michael began to feel uneasy about the way costs and profits were calculated. The results for the month just ended were:

Additional Information:

There was virtually no beginning inventory of raw material, work in process and finished goods. At the end of the month, 10% of the materials purchased remained on hand, work in process amounted to 20% of the manufacturing costs incurred during the month, and finished goods inventories were negligible.

Get to Know The Price Estimate For Your Paper
Number of pages
Email Invalid email

By clicking “Check Writers’ Offers”, you agree to our terms of service and privacy policy. We’ll occasionally send you promo and account related email

"You must agree to out terms of services and privacy policy"
Write my paper

You won’t be charged yet!

The factory occupies 80% of the premises, the sales area 15% and administration 5%. Most of the equipment is used for manufacturing, with only 5% of the book value being used for sales and administrative functions. Almost all of the electricity is consumed in the factory. The truck is used to deliver finished goods to customers. Michael Hall spends about one-half of his time on factory management, one-third in the sales area and the rest on administration.


Michael Hall asks you to review the results for the month and evaluate the company’s approach to estimating product cost. In doing so, you should:

  1. Comment on the cost classifications used in CTC’s income statement.
  2. Estimate the cost of goods manufactured and sold.
  3. Prepare a revised income statement for the month.
  4. Explain the differences between your income statement and the one above.
  5. If possible, suggest a more useful format for analysing costs than that used in your revised income statement.
  6. Evaluate the usefulness of product costs based on direct materials and direct labour.
  7. Make recommendations for changes.
Updated: Jul 20, 2021
Cite this page

Assignment Requirment. (2018, Oct 29). Retrieved from

Assignment Requirment essay
Live chat  with support 24/7

👋 Hi! I’m your smart assistant Amy!

Don’t know where to start? Type your requirements and I’ll connect you to an academic expert within 3 minutes.

get help with your assignment