Target Ltd manufactures dart boards and its budget for its first month of trading showed the following Variable production costs                                      60,000 Fixed production costs                                          40,000 Production cost of 2,000 boards                           100,000                     Closing inventory of 500 boards                           (25,000) Production costs of 1,500 boards sold                   75,000 Sales revenue                                                         150,000 Production costs of boards sold                            (75,000) Variable selling costs                                             (15,000) Fixed selling costs                                                 (10,000) Profit                                                                       50,000 The budget has been prepared using absorption costing. If a marginal costing system were used then the budgeted profit would be:

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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2.Target Ltd manufactures dart boards and its budget for its first month of trading showed the following

Variable production costs                                      60,000

Fixed production costs                                          40,000

Production cost of 2,000 boards                           100,000                    

Closing inventory of 500 boards                           (25,000)

Production costs of 1,500 boards sold                   75,000

Sales revenue                                                         150,000

Production costs of boards sold                            (75,000)

Variable selling costs                                             (15,000)

Fixed selling costs                                                 (10,000)

Profit                                                                       50,000

The budget has been prepared using absorption costing. If a marginal costing system were used then the budgeted profit would be:

  1. £10,000 lower
  2. £10,000 higher
  3. £12,500 higher
  4. £12,500 lower
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