A company manufactures and sells a single product at Shs.150 per unit. Production costs per unit are:- Materials shs. 60 Labour Shs.30 Variable overhead Shs.20 Variable selling expenses are 5% of sales revenue. Fixed monthly costs-Production 250,000 Selling and distribution 150,000 Administration 120,000 Fixed production overheads are absorbed on the basis of normal production of 20,000 units per month ie. Shs. 12.5 per unit. Sales for the months' of January to April were in (units 20,000, 22.000, 20,000, and 21,000 respectively, but production was:-23.000, 20,000, 20.000, and 20,000 for those months. Required: a) Prepare marginal and absorption costing profit statements for the months February and March. b) Distinguish between zero based budgeting and incremental budgeting and with reasons explain why one would prefer incremental budgeting to zero based budgeting.
A company manufactures and sells a single product at Shs.150 per unit. Production costs per unit are:- Materials shs. 60 Labour Shs.30 Variable overhead Shs.20 Variable selling expenses are 5% of sales revenue. Fixed monthly costs-Production 250,000 Selling and distribution 150,000 Administration 120,000 Fixed production overheads are absorbed on the basis of normal production of 20,000 units per month ie. Shs. 12.5 per unit. Sales for the months' of January to April were in (units 20,000, 22.000, 20,000, and 21,000 respectively, but production was:-23.000, 20,000, 20.000, and 20,000 for those months. Required: a) Prepare marginal and absorption costing profit statements for the months February and March. b) Distinguish between zero based budgeting and incremental budgeting and with reasons explain why one would prefer incremental budgeting to zero based budgeting.
Chapter5: Process Costing
Section: Chapter Questions
Problem 1PA: The following product Costs are available for Haworth Company on the production of chairs: direct...
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A company manufactures and sells a single product at Shs.150 per unit. Production costs per unit are:-
Materials shs. 60
Labour Shs.30
Variable overhead Shs.20
Variable selling expenses are 5% of sales revenue.
Fixed monthly costs-Production 250,000
Selling and distribution 150,000
Administration 120,000
Fixed production
a) Prepare marginal and absorption costing profit statements for the months February and March.
b) Distinguish between zero based budgeting and incremental budgeting and with reasons explain why one would prefer incremental budgeting to zero based budgeting.
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