A Battery company operating in nearby Prishtina produces identical batteries which are exported in western countries. The
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Question:
- A Battery company operating in nearby Prishtina produces identical batteries which are exported in western countries. The following information relates to January and February 2021. Budgeted costs and selling prices were:
January | February | ||
$ | $ | ||
Variable manufacturing costs per unit | 2.00 | 2.20 | |
Total fixed manufacturing costs (based on budgeted | 40,000 | 44,000 | |
output of 25,000 units per month) | |||
Total fixed marketing costs (based on budgeted sales | 14,000 | 15,400 | |
of 25,000 units per month) | |||
Selling price per unit | 5.00 | 5.50 | |
Actual production and sales recorded were:
Units (January) | Units (February) | ||
Production | 24,000 | 24,000 | |
Sales | 21,000 | 26,500 | |
There was no stock of finished goods at the start of January 2021. There was no wastage or loss of finished goods during either January or February 2021. Actual costs incurred corresponded to those budgeted for each month. For the costing of stock the FIFO method is used.
- Calculate net profit for January and February using the absorption costing format.
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