FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:1.3 Explain fully why the profits reported in period 1 differ when profit is calculated using absorption costing and
marginal costing. Calculations are required to support your explanation.
(6)
Question 2
(10 Marks)
Use the following information to calculate the value of inventory on hand on April 30 and issue price to
production during April using FIFO inventory system.
50 units @ R15 per
01-April
5
Beginning Inventory
Purchase
unit
135 units @20 per unit
9
Issue to production
95 units
11
Purchase
30 units @ R16 per
unit
16
Purchase
78 units @ R17per unit
20
Issue to production
125 units
30
Issue to production
65 units
THE END
Transcribed Image Text:QUESTION 1
A company manufactures and sells a single product. Budgeted data per unit of the product is:
(20 Marks)
Selling Price
Variable Cost*
Fixed Production overhead
R
8.50
3.70
2.90
*All variable costs are manufacturing i.e there are no non-manufacturing variable costs.
The above fixed production overhead absorption rate is based on budgeted production of 12,000 units per period.
Budgeted non-production overhead (all fixed) is R16, 800 per period.
Actual sales and production for two periods has been:
Sales
Production
Period 1
11 600 units
12 000 units
Period 2
12 400 units
12 300 units
There was no stock at the start of Period 1. The selling price, unit variable costs and total fixed costs were as per
budget in both periods.
REQUIRED
1.1 Prepare statements of Comprehensive income for both periods (ie period 1 & Period 2), using absorption costing,
showing the actual results for each of the two periods.
(7)
The company wishes to compare the results reported in (1.1) above with those that would be reported using
marginal costing.
1.2 Prepare the statement of comprehensive income for periods (ie period 1 & Period 2), using marginal costing,
showing the actual results for each of the two periods.
(7)
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