Practice 1: The following data has been extracted from the operating records of HPPT Solution Sdn Bhd for the last two quarters of the year to 31 December 2020: Quarter 3 Production units 7,000 Sales units 5,500 RM Selling price per unit 100 Variable manufacturing cost per unit: Direct material cost 20 Direct labor cost 15 Variable overheads 10 Fixed production overheads are budgeted at RM120,000 for a budgeted production of 8,000 units per quarter. These overheads are absorbed on per unit of production basis. Non-production overheads comprised: Fixed administration expenses RM40,000 per quarter. Selling and distribution expenses are 10% of sales. You are required to prepare an income statement under: (a) Marginal costing and (b) Absorption costing.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Practice 1:
The following data has been extracted from the operating records of HPPT Solution
Sdn Bhd for the last two quarters of the year to 31 December 2020:
Quarter 3
Production units 7,000
Sales units 5,500
RM
Selling price per unit 100
Variable
Direct material cost 20
Direct labor cost 15
Variable
Fixed production overheads are budgeted at RM120,000 for a budgeted production
of 8,000 units per quarter. These overheads are absorbed on per unit of production
basis.
Non-production overheads comprised:
Fixed administration expenses RM40,000 per quarter.
Selling and distribution expenses are 10% of sales.
You are required to prepare an income statement under:
(a) Marginal costing and
(b) Absorption costing.
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