(a) Prepare a marginal costing profit statement for the year ended 31 December 2019.

(b) Explain, with supporting figures, the difference in net profit / loss in (a) above and that in the absorption costing profit statement.

(c) Calculate the break-even sales revenue for the year (to the nearest £000) using the marginal costing data.

(d) Calculate the sales revenue for the year (to the nearest £000) if JJ Ltd wishes to make a profit of £375,000 using the marginal costing data.
 

Transcribed Image Text:

4/6 3. J] Ltd, is a manufacturing company. For the year ended 31 December 2019, its absorption costing profit statement is as follows: £'000 C'000 11,200 Sales revenue Production cost of sales: Opening inventory of finished goods (60,000 units) Cost of production Closing inventory of finished goods (80,000 units) Gross profit (before adjustment) Under-absorption fixed production overheads Gross profit (after adjustment) Non-production overheads Net profit 540 8,240 (720) 8,060 3,140 (210) 2,930 (2,805) 125 In both the opening and closing inventory figures in the above profit statement, fixed production overheads average £2.00 per unit of finished product. Fixed production overheads absorbed into the cost of production in the year totalled £1,820,000. Non production overheads include variable costs of £710,00o0 and fixed costs of £2,095,000. Required: (a) Prepare a marginal costing profit statement for the year ended 31 December 2019. (6 marks) (b) Explain, with supporting figures, the difference in net profit / loss in (a) above and that in the absorption costing profit statement. (5 marks) 4/6 3. J] Ltd, is a manufacturing company. For the year ended 31 December 2019, its absorption costing profit statement is as follows: £'000 C'000 11,200 Sales revenue Production cost of sales: Opening inventory of finished goods (60,000 units) Cost of production Closing inventory of finished goods (80,000 units) Gross profit (before adjustment) Under-absorption fixed production overheads Gross profit (after adjustment) Non-production overheads Net profit 540 8,240 (720) 8,060 3,140 (210) 2,930 (2,805) 125 In both the opening and closing inventory figures in the above profit statement, fixed production overheads average £2.00 per unit of finished product. Fixed production overheads absorbed into the cost of production in the year totalled £1,820,000. Non production overheads include variable costs of £710,00o0 and fixed costs of £2,095,000. Required: (a) Prepare a marginal costing profit statement for the year ended 31 December 2019. (6 marks) (b) Explain, with supporting figures, the difference in net profit / loss in (a) above and that in the absorption costing profit statement. (5 marks)

Answer rating: 100% (QA)

amount in 000 A Income statement under marginal costing Particular calculation Amount Amount Sales 1... View the full answer