Question

Question 1
Tannian Ltd. has produced the following budgeted figures for a new product which it hopes to launch.
Direct Material N$10 per unit
Direct Labour N$5 per unit
Variable Production Overhead N$ 8 per unit
Fixed Production Overhead N$ 27,000 per month
Budgeted Output 9,000 units per month
Selling Price N$ 30 per unit
The following levels of activity took place over the first two months of the products life:
Month 1 Month 2
Production units 9,000 10,000
Sales units 8,500 9,500
Note: Actual prices and costs were the same as budgeted for the first two months.
Required:
(a) Calculate the standard cost per unit and standard profit per unit under Absorption costing principles. (4 Marks)
(b) Prepare a profit statement for each month (separately) on each of the following basis:
i. Absorption Costing
ii. Marginal Costing (16 Marks)
(c) Prepare a reconciliation of the difference in profit reported in the profit statements prepared in part (b) above. 5 marks

Answer 1

Answer:

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