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1.3 Explain fully why the profits reported in period 1 differ when profit is calculated using absorption costing and marginal costing. Calculations are required to support your explanation. (6) Question 2 (10 Marks) Use the following information to calculate the value of inventory on hand on April 30 and issue price to production during April using FIFO inventory system. 50 units @ R15 per 01-April 5 Beginning Inventory Purchase unit 135 units @20 per unit 9 Issue to production 95 units 11 Purchase 30 units @ R16 per unit 16 Purchase 78 units @ R17per unit 20 Issue to production 125 units 30 Issue to production 65 units THE END QUESTION 1 A company manufactures and sells a single product. Budgeted data per unit of the product is: (20 Marks) Selling Price Variable Cost* Fixed Production overhead R 8.50 3.70 2.90 *All variable costs are manufacturing i.e there are no non-manufacturing variable costs. The above fixed production overhead absorption rate is based on budgeted production of 12,000 units per period. Budgeted non-production overhead (all fixed) is R16, 800 per period. Actual sales and production for two periods has been: Sales Production Period 1 11 600 units 12 000 units Period 2 12 400 units 12 300 units There was no stock at the start of Period 1. The selling price, unit variable costs and total fixed costs were as per budget in both periods. REQUIRED 1.1 Prepare statements of Comprehensive income for both periods (ie period 1 & Period 2), using absorption costing, showing the actual results for each of the two periods. (7) The company wishes to compare the results reported in (1.1) above with those that would be reported using marginal costing. 1.2 Prepare the statement of comprehensive income for periods (ie period 1 & Period 2), using marginal costing, showing the actual results for each of the two periods. (7)

1.3 Explain fully why the profits reported in period 1 differ when profit is calculated using absorption costing and marginal costing. Calculations are required to support your explanation. (6) Question 2 (10 Marks) Use the following information to calculate the value of inventory on hand on April 30 and issue price to production during April using FIFO inventory system. 50 units @ R15 per 01-April 5 Beginning Inventory Purchase unit 135 units @20 per unit 9 Issue to production 95 units 11 Purchase 30 units @ R16 per unit 16 Purchase 78 units @ R17per unit 20 Issue to production 125 units 30 Issue to production 65 units THE END QUESTION 1 A company manufactures and sells a single product. Budgeted data per unit of the product is: (20 Marks) Selling Price Variable Cost* Fixed Production overhead R 8.50 3.70 2.90 *All variable costs are manufacturing i.e there are no non-manufacturing variable costs. The above fixed production overhead absorption rate is based on budgeted production of 12,000 units per period. Budgeted non-production overhead (all fixed) is R16, 800 per period. Actual sales and production for two periods has been: Sales Production Period 1 11 600 units 12 000 units Period 2 12 400 units 12 300 units There was no stock at the start of Period 1. The selling price, unit variable costs and total fixed costs were as per budget in both periods. REQUIRED 1.1 Prepare statements of Comprehensive income for both periods (ie period 1 & Period 2), using absorption costing, showing the actual results for each of the two periods. (7) The company wishes to compare the results reported in (1.1) above with those that would be reported using marginal costing. 1.2 Prepare the statement of comprehensive income for periods (ie period 1 & Period 2), using marginal costing, showing the actual results for each of the two periods. (7)

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 46E: Lotts Company produces and sells one product. The selling price is 10, and the unit variable cost is...
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1.3 Explain fully why the profits reported in period 1 differ when profit is calculated using absorption costing and marginal costing. Calculations are required to support your explanation. (6) Question 2 (10 Marks) Use the following information to calculate the value of inventory on hand on April 30 and issue price to production during April using FIFO inventory system. 50 units @ R15 per 01-April 5 Beginning Inventory Purchase unit 135 units @20 per unit 9 Issue to production 95 units 11 Purchase 30 units @ R16 per unit 16 Purchase 78 units @ R17per unit 20 Issue to production 125 units 30 Issue to production 65 units THE END
Transcribed Image Text:1.3 Explain fully why the profits reported in period 1 differ when profit is calculated using absorption costing and marginal costing. Calculations are required to support your explanation. (6) Question 2 (10 Marks) Use the following information to calculate the value of inventory on hand on April 30 and issue price to production during April using FIFO inventory system. 50 units @ R15 per 01-April 5 Beginning Inventory Purchase unit 135 units @20 per unit 9 Issue to production 95 units 11 Purchase 30 units @ R16 per unit 16 Purchase 78 units @ R17per unit 20 Issue to production 125 units 30 Issue to production 65 units THE END
QUESTION 1 A company manufactures and sells a single product. Budgeted data per unit of the product is: (20 Marks) Selling Price Variable Cost* Fixed Production overhead R 8.50 3.70 2.90 *All variable costs are manufacturing i.e there are no non-manufacturing variable costs. The above fixed production overhead absorption rate is based on budgeted production of 12,000 units per period. Budgeted non-production overhead (all fixed) is R16, 800 per period. Actual sales and production for two periods has been: Sales Production Period 1 11 600 units 12 000 units Period 2 12 400 units 12 300 units There was no stock at the start of Period 1. The selling price, unit variable costs and total fixed costs were as per budget in both periods. REQUIRED 1.1 Prepare statements of Comprehensive income for both periods (ie period 1 & Period 2), using absorption costing, showing the actual results for each of the two periods. (7) The company wishes to compare the results reported in (1.1) above with those that would be reported using marginal costing. 1.2 Prepare the statement of comprehensive income for periods (ie period 1 & Period 2), using marginal costing, showing the actual results for each of the two periods. (7)
Transcribed Image Text:QUESTION 1 A company manufactures and sells a single product. Budgeted data per unit of the product is: (20 Marks) Selling Price Variable Cost* Fixed Production overhead R 8.50 3.70 2.90 *All variable costs are manufacturing i.e there are no non-manufacturing variable costs. The above fixed production overhead absorption rate is based on budgeted production of 12,000 units per period. Budgeted non-production overhead (all fixed) is R16, 800 per period. Actual sales and production for two periods has been: Sales Production Period 1 11 600 units 12 000 units Period 2 12 400 units 12 300 units There was no stock at the start of Period 1. The selling price, unit variable costs and total fixed costs were as per budget in both periods. REQUIRED 1.1 Prepare statements of Comprehensive income for both periods (ie period 1 & Period 2), using absorption costing, showing the actual results for each of the two periods. (7) The company wishes to compare the results reported in (1.1) above with those that would be reported using marginal costing. 1.2 Prepare the statement of comprehensive income for periods (ie period 1 & Period 2), using marginal costing, showing the actual results for each of the two periods. (7)
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