Ma Baker produce a mini-kitchen called Small Cook, which is enjoying extensive popularity amongst young children. The following data is available for the month:

The company produces the same number of units every month, although the sales in units vary from month to month. The company’s variable costs per unit and total fixed costs have been constant from month to month.

Questions: (where applicable, round off amounts to two decimal places)

1. Calculate the unit product cost for the month under variable costing. (3)

2. Calculate the unit product cost for the month under absorption costing. (3)

3. Prepare an income statement for the month using the absorption costing method. (6)

4. Prepare an income statement for the month using the variable costing method. (6)

5. Reconcile the variable and absorption costing net operating incomes for the month. (2)

 

Selling price (per unit) R 116 Units in opening inventory 600 Units manufactured 2 550 Units sold 3 050 Units in closing inventory 100 Variable costs per unit: Direct materials R12,00 Direct labour R50,00 Variable manufacturing overhead R6,50 Variable selling and administrative R10,00 Fixed costs: Fixed manufacturing overhead R81 000 Fixed selling and administrative R14 000