Question: Red Dragon Ltd produces a single product at a variable cost per unit as follows: Direct labour Direct material Variable overhead 12 8 26

Red Dragon Ltd produces a single product at a variable cost per

Red Dragon Ltd produces a single product at a variable cost per unit as follows: Direct labour Direct material Variable overhead 12 8 26 Each unit is sold on the market for $45. The normal activity level of the company is the production of 60 000 units per annum. Budgeted fixed production cost is $300,000. Actual fixed costs for the year were: Production $320 000 Administration $130 000 Selling and distribution $100 000 There is also a variable distribution cost of $2 per unit. For the year ended 31 December 2012 the company produced 62 000 units and sold 58 000 units. At the start of the year there were 2 000 units in stock. REQUIRED: (a) Prepare marginal and absorption costing statement for the year ended 31 December 2012. (b) Prepare a statement to reconcile the net profit under both systems.

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