A company produces and sells a single product, the standard unit costs details of which are the follows: Direct Material 2 kilos x N$4.5 per kilo Direct Labour 3 hours x N$5 per hour Variable Overhead 3 hours x N$3 per hour The total fixed overhead is budgeted at N$90,000 per month and is absorbed on a rate per unit basis. The budgeted output per month is 15,000 units. The product has a standard selling price of N$50 per unit. The following activity took place during January and February: January February Sales 14,000 units 16,000 units Production 16,000 units 14,500 units There is an opening stock on 1 January of 3,000 units. Required: (a) Calculate the standard cost and profit for one unit of output (b) Prepare profit statements for each month using (i) Marginal costing (ii) Absorption costing
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
A company produces and sells a single product, the standard unit costs details of which are the follows:
Direct Material 2 kilos x N$4.5 per kilo
Direct Labour 3 hours x N$5 per hour
Variable
The total fixed overhead is budgeted at N$90,000 per month and is absorbed on a rate per unit basis.
The budgeted output per month is 15,000 units.
The product has a standard selling price of N$50 per unit.
The following activity took place during January and February:
January February
Sales 14,000 units 16,000 units
Production 16,000 units 14,500 units
There is an opening stock on 1 January of 3,000 units.
Required:
(a) Calculate the
(b) Prepare profit statements for each month using
(i) Marginal costing
(ii) Absorption costing
Step by step
Solved in 3 steps
