Intermediate: Preparation of variable and absorption costing profit statements for FIFO and AVECO methods The following information relates to product J, for quarter 3, which has just ended:

Required:

(a) (i) Calculate the fixed overhead absorption rate per unit for the last quarter, and present profit statements using FIFO (first in, first out) using:
(ii) absorption costing;
(iii) marginal costing; and (iv)reconcile and explain the difference be¬ tween the profits or losses. (12 marks)

(b) Using the same data, present similar state¬ ments to those required in part (a). Using the AVECO (average cost) method of valuation, reconcile the profit or loss figures, and comment briefly on the variations between the profits or losses in

(a) and (b).

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Production Sales Fixed Variable (units) (units) overheads costs (000) (000) Budget 40 000 38000 300 1800 Actual 46 000 42 000 318 2070 The selling price of product J was 72 per unit. The fixed oveheads were absorbed at a pre- determined rate per unit. At the beginning of quarter 3 there was an opening stock of product J of 2000 units, valued at 25 per unit variable costs and 5 per unit fixed overheads.