QUESTION 1
p
Direct materials 2.60
Direct labour 3
Variable overhead 0.40
Fixed overhead 1
7
The fixed overhead calculation is based on a budgeted level of activity 150 000 units and budgeted manufacturing fixed overheads of P150 000 for each quarter. The budgeted selling and administration overheads are P100 000 per quarter ( all fixed ). The selling price for the product is P10 per unit . The production and sales for each quarter were :
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Production (units) 150 000 170 000 140 000 150 000
Sales (units) 150 000 140 000 160 000 160 000
There was no opening stock in quarter 1 and you should assume that actual costs were identical to estimated costs.
REQUIRED:
PREPARE INCOME STATEMENT USING:
(i) Absorption costing method for quarter 1 and 2 (13 marks)
(ii) Marginal costing method for quarter 1 and 2 ( 12 marks)
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