The Popcorn Manufacturing Company introduced in Problem 2 have decided to allocate overheads on the basis oflabour hours worked. During 1983 the following levels of production were achieved (in units):

Production Assembly Opening stock 0 0 Goods manufactured 10 000 8000 Closing stock 2000 I 000 The closing stock of 2000 units remaining in the production process represented fully completed goods that had not yet been transferred to the assembly process, while the closing stock in the assembly process represented fully completed goods which were unsold at the end of the year.

All production costs are absorbed on the basis of the actual levels of production achieved.

(a) Prepare the ledger accounts to illustrate the flow of costs for 1983.

(b) Assuming that the selling price of the finished product was £65 per unit, prepare an Income Statement on an absorption cost basis for 1983.