Capital Joinery Ltd manufactures and sells a single product. The following budgeted/ actual information is provided in relation to the production of this product:   All costs are in GBP. Show all workings very clearly.

Selling price per unit    250.00

Direct materials per unit                    60.00

Direct labour per unit      40.00

Variable production overheads per unit                   20.00

Details for the months of May and June 2020 are as follows:     

          May          June

Production of Product A             100           80

Sales of Product A (units)                         100          75

Fixed production overheads are budgeted at £2,000 per month and are absorbed on a unit basis. The normal level of production is budgeted at 100 units per month.   

Other costs

Fixed selling    £1,000 per month

Fixed Administration   £3,000 per month

Variable sales commission 2% of sales revenue

There was no opening inventory of Product A at the start of May.

You are required to prepare a profit statement based on both absorption costing and marginal costing techniques and show the reconciliation of profits between the two methods.

In order to produce this single product, Capital Joinery Ltd. uses two raw materials – wood and glass of which wood is an expensive item of material and the firm is interested in the cost variances of this raw material. The information pertaining to budgeted and actual costs of the raw material (metal) is given below and you are required to show the calculation of material variances.

Table 1: Budgeted and actual cost of wood used in producing Product A
Budgeted material cost per unit of the product	2kg at £12/kg
Actual output	1000 units
Actual material purchased and used	2400kg
Actual material cost	£22,400

During the month of May, the following purchases, and issues of the raw material (glass) were made and the store assistant wishes to know the closing value of the raw material inventory at the end of the month. He provides you with the following information relating to the purchases and issues during the month. You are required to show the inventory ledger record for the month of JUNE using the LIFO and Average Cost methods of inventory accounting.

Table 2: Purchases and issues of raw material (glass) during the month of JUNE

June 1	Opening Inventory of 10 units @£35 each
June 9	Bought 15 units @ £38 each
June 15	Issued 12 units
June 20	Bought 10 units @32 each
June 23	Issued 10 units
June 27	Issued 3 units
June 30	Issued 2 units

The financial report produced must accurately apply and interpret data for a range of business activities in Capital Joinery Ltd.

Answer rating: 100% (QA)

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