Answer.

$[30$ MARKS$]$

Read the following case study and answer the questions that follow:

BAGGIO MANUFACTURERS

Baggio Manulacturers, which produces qualify laptop bags, had sales and production volumes of $9000$ units and $10000$ units respectively during August $2024.$ There was no opening inventory of finished goods on $01$ August $2024.$ Fixed manulacturing costs and faxed administration costs for August $2024$ totaled R$120000$ and R$72000$ respectively. Variable manufacturing costs and varible seling costs for the tame month amounted to R$600000$ and R$333000$ respectively.

During September $2024$ the sales and production increased to $16000$ units and $20000$ units respectively. The seling price was R$300$ per laptop bag. Variable manufacturing costs increased to R$70$ per unit whilst the variable seling costs per unit remained the same. Fixed manufacturing costs increased to R$160000$ whilst the fixed administration costs increased by R$10000.$ The firstin$-$first$-$out method is used to velee inventories.

Baggio Manufacturers used the absorption costing method to prepare its income statement but the nealy appointed financial manager prefers the variable costing method.

REQUIRED

Prepare the Income Statement for the month ended $30$ Seplember $2024$ using the variable costing method.

$(11$ marks$)$

Prepare the income Statement for the month ended $30$ September $2024$ using the absorption costing method.

$(11$ marks$)$

Reconcile the profit calculated according to absorption costing $($in question $2)$ with the profit calculated according to variable costing $($in question $1).$ Your answer must include the calculations of the fixed manufacturing costs in the opening and dosing

$(4$ maks$)$ inventories.

Calculate the product costs and period costs for the month ended $31$ August $2024$ if absorption costing is used. $($Ignore inventories.$)$

$(4$ marks$)$