Question 6

Eqaute Co produces a single product. During the year ended 31 August 2021, 4,000 units were produced and 4,000 were sold at BWP160.00 per unit. There was no opening or closing inventory. The costs of manufacturing during the year were shown as follows:

BWP

Direct Materials 240,000

Direct Labor 80,000

Production overheads (40% is variables and 60% is fixed) 136,000

Variable Selling and distribution costs 8,400

Fixed selling and administration overheads 160,000

Required

1. Calculate the production cost per unit using marginal and absorption costing. [5 marks]

Calculate the profit in the month of August 2021 using Absorption and marginal costing system. [13 marks