Question $1(29$ marks$)$

The following information relates to ABC company which produces and sells a single product named Product A $($PA$).$

The standard cost of producing one PA is as follows:

$$

$2$kgs of direct materials are needed per unit. The material cost N$$4\mathrm{.}50$ per kg$.$

$$

$3$ hours of direct labour costing N$$5$ per hour are required per unit

$$

Variable overheads are levied based on direct labour hours and are allocated at a rate of N$$3$ per hour.

It is company policy to allocate fixed overheads on a per unit basis. Fixed overheads are estimated to be N$$90000$ per month and the monthly production is estimated at $15000$ units.

Each unit of the PA is sold at a standard price of N$$50$ per unit. The sales and production for January and February are as follows:

January

February

Sales

$14000$ units

$16000$ units

Production

$16000$ units

$14500$ units

Inventory at hand at the beginning of January was $3000$ units.

Required

Marks

$1\mathrm{.}1$

Given the information above, calculate how much it cost to produce one unit of PA and the profit resulting from the sell of that unit.

$5$

$1\mathrm{.}2$

Using the marginal costing approach, prepare the profit statement for ABC for each month. Use the columnar format where January and February are presented as columns in one profit statement.

$10$

$1\mathrm{.}3$

Using the absorption costing approach, prepare the profit statement for ABC for each month. Use the columnar format where January and February are presented as columns in one profit statement.

$10$

$1\mathrm{.}4$

Using your answers to $1\mathrm{.}2$ and $1\mathrm{.}3$ above, prepare a reconciliation statement of the profits reported by these two methods.

$4$

Total

$29$