Prepare the Income statement of Cambridge Manufacturers for the year ended 31 March 2021 using the absorption costing method. INFORMATION The following information was extracted from the accounting records of Cambridge Manufacturers for the year ended 31 March 2021: Inventory on 01 April 2020 1 000 units Production for the year 30 000 units Sales for the year (at R240 per unit) 25 000 units Costs: Direct materials cost per unit R60 Direct labour cost per unit R36 Variable manufacturing overheads cost per unit R24 Variable selling and administrative costs per unit sold R12 Fixed manufacturing overhead cost R696 000 Fixed selling and administrative cost R303 200 Additional information ¦ The total manufacturing costs per unit for the year ended 31 March 2020 amounted to R130, comprising R110 for variable manufacturing costs and R20 for fixed manufacturing costs. The total selling and administrative costs per unit for the same period amounted to R10. ¦ The first-in-first out method of inventory valuation is used. 2.1 Use the information provided below to calculate the following variances for May 2021. Each answer must indicate whether the variance is favourable or unfavourable. 2.2 2.2.1 Material quantity variance 2.2.2 Labour efficiency variance 2.2.3 Total labour variance (without using the labour rate or efficiency variances)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Prepare the Income statement of Cambridge Manufacturers for the year ended 31 March 2021
using the absorption costing method.
INFORMATION
The following information was extracted from the accounting records of Cambridge Manufacturers for the year ended
31 March 2021:
Inventory on 01 April 2020 1 000 units
Production for the year 30 000 units
Sales for the year (at R240 per unit) 25 000 units
Costs:
Direct materials cost per unit R60
Direct labour cost per unit R36
Variable
Variable selling and administrative costs per unit sold R12
Fixed manufacturing overhead cost R696 000
Fixed selling and administrative cost R303 200
Additional information
¦ The total manufacturing costs per unit for the year ended 31 March 2020 amounted to R130, comprising R110
for variable manufacturing costs and R20 for fixed manufacturing costs. The total selling and administrative
costs per unit for the same period amounted to R10.
¦ The first-in-first out method of
2.1
Use the information provided below to calculate the following variances for May 2021. Each answer
must indicate whether the variance is favourable or unfavourable.
2.2
2.2.1 Material quantity variance
2.2.2 Labour efficiency variance
2.2.3 Total labour variance (without using the labour rate or efficiency variances)
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