The following information relates to the only product manufactured and sold by Ash plc. Kwacha per...

 

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The following information relates to the only product manufactured and sold by Ash plc. Kwacha per unit 70 25 Selling price Direct material cost Direct labour cost Variable production overhead Variable sales & marketing overhead 20 The following levels of activity took place over the first three months of the products life: Sales Units Production Units September October November 4,750 5,500 6,500 5,000 6,000 7,000 Additional information is as follows: 1. Budgeted fixed production overhead was K300 000 perannum. 2. Actual fixed production overhead for the period was K25 000 permonth 3. Sales and marketing overhead of K25 000permonthandadministrationoverheadofK18 750 per month were in line with the budget for thatperiod. 4. All fixed overhead costs are budgeted on the basis of a projected volume of 75 000 units per yearandallcostsareexpectedtobeincurredataconstantratethrou ghouttheyear. 5. The business does not expect to have any inventory at 1September Required: a) Prepare a profit statement for each month using each of the following bases: i. Absorption costing Marginal costing (10 Marks) (10 Marks) ii. b) Calculate the (under)/over absorbed fixed production overhead for each month. (5 Marks) c) Explain the reason for any difference in the reported profit under the two bases for each month. Full-screen Snip (5 Marks) The following information relates to the only product manufactured and sold by Ash plc. Kwacha per unit 70 25 Selling price Direct material cost Direct labour cost Variable production overhead Variable sales & marketing overhead 20 The following levels of activity took place over the first three months of the products life: Sales Units Production Units September October November 4,750 5,500 6,500 5,000 6,000 7,000 Additional information is as follows: 1. Budgeted fixed production overhead was K300 000 perannum. 2. Actual fixed production overhead for the period was K25 000 permonth 3. Sales and marketing overhead of K25 000permonthandadministrationoverheadofK18 750 per month were in line with the budget for thatperiod. 4. All fixed overhead costs are budgeted on the basis of a projected volume of 75 000 units per yearandallcostsareexpectedtobeincurredataconstantratethrou ghouttheyear. 5. The business does not expect to have any inventory at 1September Required: a) Prepare a profit statement for each month using each of the following bases: i. Absorption costing Marginal costing (10 Marks) (10 Marks) ii. b) Calculate the (under)/over absorbed fixed production overhead for each month. (5 Marks) c) Explain the reason for any difference in the reported profit under the two bases for each month. Full-screen Snip (5 Marks)

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Answer a i Profit statament Using Absorbation Costing Particular September 332500 256500 76000 Octob... View the full answer