Johnson Stores produce and sell face powder called the ‘Success’ in cases. Each case is sold for £80. The following information relates to the product in the autumn and summer of 2020:

Other related information:

Normal capacity for the year was 117,600 cases to be produced evenly throughout the year with a budgeted cost of £470,400.

Required

Assume that there will be no inventory held on January 1, 2020.
1. Prepare profit statement for each of the two quarters using absorption and variable costing techniques.
2. Compute and reconcile the differences in the operating incomes of both techniques.
3. Comment on the differences in the operating incomes of both techniques.

Transcribed Image Text:

Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expenses Variable selling expenses Admin expenses: Variable (10% of sales value) Fixed (25% of sales value) Autumn £136,800 133,950 71,250 120,000 25,500 42,750 Summer £146,880 143,820 76,500 122,000 25,500 45,900