A newly formed company has drawn up the following budgets for its first two accounting periods:

The following budgeted information applies to both periods:.............................................................................$Selling price per unit .........................................6.40Variable cost per unit ........................................3.60Fixed production overhead per period ..........15 000(a) In period 1, the budgeted profit will be:(i) The same under both absorption costing and marginal costing;(ii) $750 higher under marginal costing;(iii) $750 higher under absorption costing;(iv) $1400 higher under absorption costing.(b) In period 2, everything was as budgeted, except for the fixed production overhead, which was $15 700.The reported profit, using absorption costing in period 2, would be:(i) $12 300(ii) $12 690(iii) $13 140(iv) $13 840

Transcribed Image Text:

Period 2 Period 1 Sales units Production units (equivalent to normal capacity) 10300 9500 10000 10000