a company manufactures a single product with the following variable costs per unit: direct material R7.00 Direct labour R5.50 Manufacturing overhead R2.00

The selling price of the product is R36 per unit. fixed manufacturing costs are expected to be R1340 000 for a period. fixed non manufacturing costs are expected to be R875 000. fixed manufacturing costs can be analyzed as follows: production 1 R380 000 department 2 R 465000 service department R 265 000 general factory R 230 000

general factory cost represented space costs, for example rates, lighting and heating. space utilization is as follows: production department 1. 40% production department 2. 50% service department. 10%

60% of service department costs are labour related and the remaining 40% machine related.

normal production department activity is: DL hr. machine hr. production hr. dep 1. 80 000. 2400. 120 000. dep 2. 100 000. 2400. 120 000

fixed manufacturing overhead are absorbed at a predetermined rate per unit of production for each production department, based upon normal activity.

required: a. prepare a profit statement for a period using the full absorption costing system described above and showing each element of cost separately. costs for the period were as per expectation, except for additional expenditure of 20 000 on fixed manufacturing overhead in production department 1. production and sales were 116 000 and 114 000 units respectively for the period. b. prepare a profit statement for the period using marginal costing principles instead. c. contrast the general effect on profit of using absorption and marginal costing systems. respectively. (use the figures calculated in (a) and (b) above to illustrate your answer