The standard cost of a product, made by Precision Ltd (that started its operations on 1 January 1993), is as follows:

The normal output, on which the fixed overhead absorption rate of £7.50 has been calculated, is 48,000 units per year.

Required Prepare profit statements for January and February 1993 using

(a) absorption costing, and

(b) variable costing, given the following additional information:
Production in January was 2,000 units and in February it was 3,200 units; whereas sales for January amounted to 1,500 units, and sales for February amounted to 3,000 units.
The selling price per unit is £52.50; and the selling and administration expenses are fixed at £180,000 per year, and variable up to 10% of sales value.
All fixed costs are assumed to accrue evenly throughout the year.

Transcribed Image Text:

Direct materials 12.00 Direct labour 7.50 Variable production overheads 3.00 Fixed production overheads 7.50 Total costs of production 30.00