2 Brandon plc is dedicated to the production and sale of speed scooters. The companys budgeted production
Question:
2 Brandon plc is dedicated to the production and sale of speed scooters. The company’s budgeted production is 3,000 units per month.
Variable manufacturing costs $16 per unit
Variable selling costs $ 4 per unit
Fixed selling costs $24,000 per month
Fixed manufacturing costs $30,000 per month
Each pair of sunglasses sells for $40.The company values stock on a first-in-first out basis.
Other data relating to Sept and Oct 2019 were as follows:
Number of units | Sept | Oct |
Opening inventory | 400 | 100 |
Production | 3,400 | 3,300 |
Sales | 3,700 | 2,800 |
Closing inventory | 100 | 600 |
Question
(a) Prepare income statements using absorption costing, for each of the months Sept and Oct 2019 (8 marks)
(b) Prepare income statements using marginal costing, showing clearly your calculation of contribution, for the months Sept and Oct 2019. (8 marks)
(c) Reconcile to profits calculated on a marginal costing basis with the profits calculated on an absorption costing basis for Sept and Oct 2019. You are required to reconcile the figures with a numerical computation and also to explain the difference in a brief written statement for the directors of the business.
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer