Ocean Sails manufactures sailing boats in two models: the Wave Rider and the Stress Killer. The company currently uses a variable costing system for internal reporting purposes. Its budgeted profit statement for the year ended 31 March 2021 is provided in the following table: Wave Rider (£) Stress Killer (£) Total (£) Sales revenues 52,500,000 105,000,000 157,500,000 Variable cost of goods sold 39,343,750 79,800,000 119,143,750 Variable marketing & admin costs 6,300,000 12,600,000 18,900,000 Contribution margin 6,856,250 12,600,000 19,456,250 Fixed manufacturing overhead 3,500,000 Fixed marketing & admin costs 16,000,000 Profit (Loss) (43,750) The following information from the budget is also available: Wave Rider Stress Killer (Units) (Units) Opening inventory 5 8 Units produced 20 25 Closing inventory 15 5 Units sold 10 28 The variable cost of goods sold comprises of direct materials and direct labour (there are no variable manufacturing overheads). The production of each unit of Wave Rider takes 750 labour hours, while each unit of Stress Killer requires 1,000 labour hours. Required: (a) Using labour hours as overhead allocation base, rewrite the budgeted profit statement in an absorption costing format. Show all workings clearly.
Ocean Sails manufactures sailing boats in two models: the Wave Rider and the Stress Killer. The company currently uses a variable costing system for internal reporting purposes. Its budgeted profit statement for the year ended 31 March 2021 is provided in the following table:
|
|
Wave Rider (£) |
Stress Killer (£) |
Total (£) |
|
Sales revenues |
52,500,000 |
105,000,000 |
157,500,000 |
|
Variable cost of goods sold |
39,343,750 |
79,800,000 |
119,143,750 |
|
Variable marketing & admin costs |
6,300,000 |
12,600,000 |
18,900,000 |
|
Contribution margin |
6,856,250 |
12,600,000 |
19,456,250 |
|
Fixed manufacturing overhead |
|
|
3,500,000 |
|
Fixed marketing & admin costs |
|
|
16,000,000 |
|
|
|
|
(43,750) |
The following information from the budget is also available:
|
|
Wave Rider |
Stress Killer |
|
|
(Units) |
(Units) |
|
Opening inventory |
5 |
8 |
|
Units produced |
20 |
25 |
|
Closing inventory |
15 |
5 |
|
Units sold |
10 |
28 |
The variable cost of goods sold comprises of direct materials and direct labour (there are no variable manufacturing
Required:
(a) Using labour hours as overhead allocation base, rewrite the budgeted profit statement in an absorption costing format. Show all workings clearly.
Step by step
Solved in 2 steps with 2 images
