Archibald Ltd manufactures and sells one product. Its budgeted profit statement for the first month of trading is as follows: 

The budget was prepared using absorption costing principles. If budgeted production in the first month had been 2000 units then the total production cost would have been £188,000. 

Required

1 Using the high-low method, calculate: 

a. The variable production cost per unit; and 

b. The total monthly fixed production cost. 

2. If the budget for the first month of trading had been prepared using marginal costing principles, calculate: 

a. The total contribution; and 

b. The net profit. 

3. Explain clearly the circumstances in which the monthly profit or loss would be the same using absorption or marginal costing principles.

Transcribed Image Text:

Sales (1200 units at £180 per unit) 216 000 Less Cost of sales: Production (1800 units at £100 per unit) Less Closing stock (600 units at £100 per unit) 180 000 (60 000) (120 000) Gross profit Less Fixed selling and distribution costs Net profit 96 000 (41000) 55 000