Question 1 Mpu Confectionery is a chocolate manufacturing business. For this year, it has experienced a huge decline in sales due to a lifestyle change by many of its customers as they reduce sugar intake as well as harshly hit by regulations in terms of sugar taxes. The actual results for the month of September are as follows: August sales dropped unexpectedly (6 500 units, Revenue N$ 68 835) and 2 500 units of chocolate bars valued at N$ 5.00 per bar (variable N$ 1.15) remained unsold at the end of the month. Production for September was 10 000 bars, and in order to push for sales in September Mpu management decided to reduce August unit selling price by 15% resulting in sale surging to 11 000 bars for the month of September. Fixed production overheads are N$46 200 with budgeted production of 12 000 bars while selling administration costs (variable N$ 35 000, Fixed N$ 15 000). REQUIRED 1.1. Using the weighted average method for stock valuation, compute the income statement for the month of September in accordance with the Absorption costing method. 1.2. Using your answer to A, determine the profit or loss that would be achieved under variable costing
Question 1
Mpu Confectionery is a chocolate manufacturing business. For this year, it has experienced a
huge decline in sales due to a lifestyle change by many of its customers as they reduce sugar
intake as well as harshly hit by regulations in terms of sugar taxes. The actual results for the
month of September are as follows:
August sales dropped unexpectedly (6 500 units, Revenue N$ 68 835) and 2 500 units of
chocolate bars valued at N$ 5.00 per bar (variable N$ 1.15) remained unsold at the end of the
month. Production for September was 10 000 bars, and in order to push for sales in September
Mpu management decided to reduce August unit selling price by 15% resulting in sale surging to
11 000 bars for the month of September.
Fixed production overheads are N$46 200 with budgeted production of 12 000 bars while selling
administration costs (variable N$ 35 000, Fixed N$ 15 000).
REQUIRED
1.1. Using the weighted average method for stock valuation, compute the income
statement for the month of September in accordance with the Absorption costing
method.
1.2. Using your answer to A, determine the profit or loss that would be achieved under
variable costing
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