Question 8.2 Galbraith Manufacturing Co. Ltd manufactures a single product with the following variable costs per unit:

Direct materials £6.00 Direct labour £6.50 Manufacturing overheads £3.00 The selling price of the product is £40.00 per unit.

Fixed manufacturing costs are expected to amount to £1 265 000 for the period. Fixed non-manufacturing costs are expected to be £920 000. Fixed manufacturing costs can be analysed as follows:

Production depts Service dept. General factoryoverheads 1 2

(£) (£)

(£) (£)

360 000 455 000 220 000 230 000 General factory costs represent space costs (e.g. lighting, heating and rent).

Space utilisation is as follows:

Production dept. 1 45%

Production dept. 2 35%

Service dept. 20%

Service department costs are related to labour activity (50 per cent) and to machine activity (50 per cent). Normal production department activity is as follows:

Direct labour Machine Production (hours) (hours) (units)
Dept. 1 70 000 3200 150 000 Dept. 2 110 000 2600 150 000 Fixed manufacturing overheads are absorbed at a predetermined rate per unit of production for each production department, based upon normal activity levels. The company operates a full absorption costing system.
Actual costs were as per expectations except for additional expenditure of £25 000 on fixed manufacturing overheads in department 1. Actual production level achieved and level of sales were 146 000 units.
Prepare a profit statement for the period.