A company has a production capacity of 200,000 units per year. Normal capacity utilization is reckoned as
Question:
A company has a production capacity of 200,000 units per year.
Normal capacity utilization is reckoned as 90%.
Standard variable production costs are Tk. 11.00 per unit.
The fixed factory costs are Tk. 360,000.00 per year.
Variable selling costs are Tk. 3.00 per unit and fixed selling costs are Tk. 270,000.00 per year .
The unit selling price is Tk. 20.00. In the year just ended on 30th June, 2021, the production was 160,000 units and sales were 150,000 units.
The closing inventory on 30-06-2021 was 20,000 units. The actual variable production costs for the year were Tk. 35,000.00 higher than the standard.
Required
1. Calculate the profit for the year ended 30th June,2021 A. Absorption Costing Method B. Variable Costing Method
2. Explain why net profit ascertained under absorption costing will not be same as under variable costing
3. Reconcile the amount of profit calculated following Absorption Costing Method and variable costing Method.
Expert Answer:
Answer Solution Under variable costing unit product cost shall consider only the variable mfg costs ... View the full answer
