Shanell Industrial Limited makes and sells one product, which has the following standard variable production costs per unit. Rs. Direct materials cost (2 kg at Rs.25 per kg) 50 Direct labour cost (3 hours at Rs.40 per hour) 120 Variable production overhead costs (Rs.10 per labour hour) 30 The budgeted selling price per unit is Rs.400 for the coming two years. The production and sales budgets for the next two years are as follows: 2019 2020 Production in units 50,000 60,000 Sales in units 40,000 70,000 There is no opening inventory at the beginning of 2019. Budgeted and actual costs are as follows. Fixed production overhead costs Rs.1,080,000 Fixed non-production overhead costs per annum Rs.2,000,000 Variable non-production overhead costs Rs.10 per unit sold Fixed production overhead costs are absorbed based on a normal production level of 54,000 units per annum.

Prepare the income statements for 2020 under marginal costing and absorption costing.

Answer rating: 100% (QA)

Step 12 Shanell Industrial Limited Income statement Marginal costing 2019 2020 Sales 16000000 28000000 Variable expenses Variable Cost of goods sold 8... View the full answer