Marginal costing and absorption costing profit computations and calculation of breakeven point for a given sales mix A company has two products with the following unit costs for a period:

Production was at normal levels. Unit costs in opening stock were the same as those for the period listed above.
Required:

(a) State whether, and why, absorption or marginal costing would show a_ higher company profit for the period, and calculate the difference in profit depending upon which method is used. (4 marks)

(b) Calculate the break-even sales revenue for the period (to the nearest £000) based on the above mix of sales. The selling prices of products A and B were £5.70 and £6.90 per unit, respectively.

Transcribed Image Text:

Product A Product B (/unit) (/unit) Direct materials 1.20 2.03 Direct labour 1.40 1.50 Variable production overheads 0.70 0.80 Fixed production overheads 1.10 1.10 Variable other overheads 0.15 0.20 Fixed other overheads 0.50 0.50 Production and sales of the two products for the period were: Product A Product B (000 units) (000 units) Production 250 100 Sales 225 110