QUESTION 1 Lagos Textile Manufacturing Company Limited produces a range of fabric materials at its factory in Ikeja, Lagos. The company's management accountant, Mr. Chukwuemeka Obi, is preparing a cost report for the board of directors. He has identified the following costs incurred during the quarter ended 31 March 2024: 1. Cotton raw material used in production: N4,500,000 2. Salaries of factory supervisors: N1,200,000 3. Depreciation of weaving machines (straight-line basis): N800,000 4. Electricity consumed in the factory (metered): N650,000 5. Salary of the Managing Director: N2,400,000 6. Royalty paid per metre of fabric produced: N0.50 per metre (Total metres produced: 1,000,000) 7. Factory rent (fixed annual lease): N3,600,000 per annum 8. Maintenance costs (comprising a fixed retainer of N100,000 per month plus N0.20 per machine hour): N480,000 total for the quarter (machine hours used: 600,000) 9. Advertising expenses for new product launch: N350,000 10. Carriage inwards on raw materials: N120,000 Required: (a) Classify EACH of the ten costs above under the following headings: (i) Direct or Indirect cost; (ii) Fixed, Variable, or Semi-variable cost. Present your answer in a tabular format. (10 marks) (b) Explain the difference between a 'product cost' and a 'period cost', and identify which of the costs listed in items 1–10 above fall into each category. (6 marks) (c) Mr. Obi is concerned that the board may not understand why some costs behave differently as production volume changes. Briefly explain, with ONE example each drawn from the list above, how FIXED costs and VARIABLE costs behave as output increases, and state the implication of this behaviour for managerial decision-making. (4 marks) Total: 20 marks