Answered: XYZ Ltd produce a mini-kitchen called…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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XYZ Ltd produce a mini-kitchen called Tiny Tots, which is enjoying extensive popularity
amongst young children. The following data is available for the month of March 2018:
Selling price (per unit) R 116

Units in opening inventory 600
Units manufactured 2 550
Units sold 3 050
Variable costs per unit:
Direct materials R12,00
Direct Labour R50,00
Variable manufacturing overhead R6,50
Variable selling and administrative R10,00
Fixed costs:
Fixed manufacturing overhead R81 000
Fixed selling and administrative R14 000

The company produces the same number of units every month, although the sales in
units vary from month to month. The company’s variable costs per unit and total fixed
costs have been constant from month to month.
Required:
4.1. Prepare an income statement for the month using the variable costing
method. (10)
4.2. Prepare an income statement for the month using the absorption costing
method. (10)

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