Question: The following data have been extracted from the budgets and standard costs of Rachel Limited, a company which manufactures and sells single product R for

  1. The following data have been extracted from the budgets and standard costs of Rachel Limited, a company which manufactures and sells single product R for the year ended April 2020.

Selling price sh. 320

Direct materials cost sh. 90

Direct wages cost sh. 60

Variable overhead costs sh. 25

Fixed production overhead Sh.2, 320,000 per annum

Fixed selling and distribution costs Sh.500, 000 per annum

The following patterns of sales and production are expected during the year ended 2020.

Sales (units) 230,000

Production (units) 290,000

There opening stock on 1st May 2019 was 1,200 units

Required:

Prepare profit statements in a columnar format, using the following:

(i) Marginal costing (3 Marks)

(ii) Absorption costing (4 Marks)

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