CMA T7SBQ1
CMA T7SBQ1
Pinafore Ltd manufactures and sells a single product. The budgeted profit statement for this month, which has been prepared using marginal costing principles, is as follows
(a) Prepare in full a budgeted profit statement for this month using absorption costing principles. Assume that fixed production overhead costs are absorbed using the normal level of activity.
(b) Prepare a statement that reconciles the net profit calculated in (a) with the net profit using marginal costing. RM(‘000) RM(‘000)
Sales (24,000 Units) 864
Less:Variable production cost of sales
Opening Stock (3,000 units x 28) 84
Production (22,000 units x 28) 616
Closing stock (1,000 units x 28) (28) (672) Unadjusted Gross Profit 192 Less:Underabsorption of Fixed Production Cost (15) 177
Less:Non-Production Cost
Variable selling cost 60
Fixed selling and administration cost 40 (100)
Net Profit 77
(b)Variable production per unit =69000/3000 =RM 23 per unit +Fixed production OHAR =125000/25000= RM 5 per unit RM28 per unit
Fixed factory OH absorbed =OHAR X Actual production =RM 5 x 22,000 units =RM 110,000
Less: Actual Fixed factory OH Incurred=(RM 125,000) (RM 15,000)Underabsorption
(c) Which of the two costing principles (absorption or marginal) is more relevant for short-run
Pinafore Ltd manufactures and sells a single product. The budgeted profit statement for this month, which has been prepared using marginal costing principles, is as follows
(a) Prepare in full a budgeted profit statement for this month using absorption costing principles. Assume that fixed production overhead costs are absorbed using the normal level of activity.
(b) Prepare a statement that reconciles the net profit calculated in (a) with the net profit using marginal costing. RM(‘000) RM(‘000)
Sales (24,000 Units) 864
Less:Variable production cost of sales
Opening Stock (3,000 units x 28) 84
Production (22,000 units x 28) 616
Closing stock (1,000 units x 28) (28) (672) Unadjusted Gross Profit 192 Less:Underabsorption of Fixed Production Cost (15) 177
Less:Non-Production Cost
Variable selling cost 60
Fixed selling and administration cost 40 (100)
Net Profit 77
(b)Variable production per unit =69000/3000 =RM 23 per unit +Fixed production OHAR =125000/25000= RM 5 per unit RM28 per unit
Fixed factory OH absorbed =OHAR X Actual production =RM 5 x 22,000 units =RM 110,000
Less: Actual Fixed factory OH Incurred=(RM 125,000) (RM 15,000)Underabsorption
(c) Which of the two costing principles (absorption or marginal) is more relevant for short-run