King Denny Ltd manufactures and sells a single product whose selling price is GHS19.5 per unit....

 

Transcribed Image Text:

King Denny Ltd manufactures and sells a single product whose selling price is GHS19.5 per unit. The following costs were incurred during the last financial year: At the beginning of the year, the company had 15,000 units in inventory. During the year, the company produced 120,000. There were 25,000 units of the product in stores at the end of the year. Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead GHS Fixed costs for the year: GHS 7 Fixed manufacturing overhead 240,000 3 Fixed selling and administrative 840,000 overhead 2.5 Variable selling and administrative overhead 3 Total 15.5 5 1080,000 Required: (a) Compute the unit product cost under absorption and variable costing systems (b) Prepare an income statement for the year under absorption costing. [4 Marks] [5 Marks] [5 Marks] (c) Prepare an income statement for the year using a variable costing system (d) Prepare a reconciliation of the variable and absorption costing net operating income. [4 Marks] (e) Explain the reason for the difference in net income between the two costing methods [Total = 20 Marks] [2 Marks] King Denny Ltd manufactures and sells a single product whose selling price is GHS19.5 per unit. The following costs were incurred during the last financial year: At the beginning of the year, the company had 15,000 units in inventory. During the year, the company produced 120,000. There were 25,000 units of the product in stores at the end of the year. Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead GHS Fixed costs for the year: GHS 7 Fixed manufacturing overhead 240,000 3 Fixed selling and administrative 840,000 overhead 2.5 Variable selling and administrative overhead 3 Total 15.5 5 1080,000 Required: (a) Compute the unit product cost under absorption and variable costing systems (b) Prepare an income statement for the year under absorption costing. [4 Marks] [5 Marks] [5 Marks] (c) Prepare an income statement for the year using a variable costing system (d) Prepare a reconciliation of the variable and absorption costing net operating income. [4 Marks] (e) Explain the reason for the difference in net income between the two costing methods [Total = 20 Marks] [2 Marks]