Resistor Ltd manufactures electrical units. All units are identical. The following information relates to June and July Year 5.
(a) Budgeted costs and selling prices were:

(b) Actual production and sales recorded were:

c) There was no stock of finished goods at the start of June Year 5. There was no wastage or loss of finished goods during either June or July Year 5.
(d) Actual costs incurred corresponded to those budgeted for each month.
Required
Calculate the relative effects on the monthly operating profits of applying the undernoted techniques:
1. Absorption costing;
2. Marginal costing.

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June July Variable manufacturing cost per unit Total fixed manufacturing costs (based on budgeted 2.00 40,000 2.20 44,000 output of 25,000 units per month) Total fixed marketing cost (based on budgeted sales of 25,000 units per month) 14,000 15,400 5.50 Selling price per unit 5.00 Units Units Production Sales 24,000 24,000 21,000 26,500