Using the information provided in Exhibit 1; prepare a memo to the client explaining how you would go about classifying the various resources as presented. Explaining includes providing a clear rationale for the classifications with examples from LTBC with the following content:
i) How to classify resources consumed into manufacturing overhead, direct materials, direct labor, selling, and administration.
ii) How to split costs between variable and fixed. {Limit two pages}
2) Using the information provided in Exhibits 1 and 2; prepare the following statements in proper format including titles, and proper underlining:
i) Cost of Goods Manufactured Statement for the year ended December 31, 2011.
ii) Income Statement for the year ended December 31, 2011. {Limit two pages}
3) Prepare a memo to the client explaining the advantages and disadvantages of accepting Costco's order. Using the information provided in Exhibit 3, compute the expected customer margin from selling the teddy bears to Costco. What qualitative factors should LTBC have considered? {Limit one page}
4) Prepare a memo to the client explaining how they would go about implementing Activity Based Costing (ABC). Explain the advantages and disadvantages of implementing ABC. Would you recommend LTBC to implement ABC? Provide a clear rationale to your answers. {Limit one page} ?