Ken owns a manufacturing business which makes a single product. The... Ken owns a manufacturing business which
Question:
Ken owns a manufacturing business which makes a single product. The...
Ken owns a manufacturing business which makes a single product. The following figures
apply for all relevant periods.
Per unit $
Selling price 35
Direct material 9
Direct labour 11
Fixed manufacturing overheads 5
Fixed manufacturing overheads are absorbed into product costs at pre-determined rates per unit
of output. Under- or over-absorbed manufacturing overheads are transferred to profit and loss in
the period in which they occur. Normal production is 80 000 units per accounting period.
REQUIRED:
(a) Calculate the break-even point in both units and dollars, based on the information above.
The following information has been acquired for the last three accounting periods.
Three months ended 28 February 31 May 31 August
Units Units Units
Sales 60 000 80 000 45 000
Stock at start of period 15 000 0 35 000
Stock at end of period 0 35 000 20 000
(b) Calculate the profit or loss in each period using marginal costing.
(c) Calculate the profit or loss in each period using absorption costing.
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw