Modem Metal Works details in German Silver Sets; the standard production cost of which is as under:
Question:
Modem Metal Works details in German Silver Sets; the standard production cost of which is as under:
Rs.
Direct material 4kg @ Rs.35 140
Direct labour 3 Hrs @ Rs.30 90
F.O.H- Variable 15
Fixed 100
Total cost 345
Normal output is 16,000 units per annum, costs relating to selling, distribution and administration are:
Variable 20% of sales value
Fixed Rs.900,000 per annum
The only variance is fixed (production) OH volume variance.
There are no sets in finished goods stock as on 1st April 2002. The fixed overheads expenditure is spread throughout the year. The selling price per set is Rs.700. The numbers of sets to be produced and sold are budgeted are:
Six month ending Six month ending
30th September 2002 31st March 2003
Production 8,500 7,000
Sales 7,000 8,000
Required:
(i) Prepare statements showing sales, costs of sales and profit for each six month period, using:
Marginal costing
Absorption costing
(ii) Prepare explanatory statement reconciling each six months period profit using marginal costing with that of absorption costing.
Financial and Managerial Accounting
ISBN: 978-1285866307
13th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac