Calculate costs using appropriate techniques of cost analysis to prepare an income statement usingvariable and absorption costs.
UCK Furniture produce one product - desks.
Each desk is budgeted to require 4 kg of wood at 3 per kg, 4 hours of labour at £2 per hour, and variable production overheads of £5 per unit.
Fixed production overheads are budgeted at £20,000 per month and average production is estimated to be 10,000 units per month.
The selling price is fixed at £35 per unit. There is also a variable selling cost of £1 per unit and fixed selling cost of £2,000 per month.
During the first two months X plc expects the following levels of activity:
February          11,000 units
January              9,500 units
Production     11,500 units
Sales                 9,000 units
a. Prepare an income statement using absorption costing and variable costing .
b. Accurately apply a range of management accounting techniques and produce a financial reporting document.
c. Produce financial reports that accurately apply and interpret data for a range of business activities.
Make the interpretation of the both costing methods and explain the potential merits and demerits of  the both methods.