Answer ALL questions.

Read the following case study and answer the questions that follow:

SWANN MANUFACTURERS

Swann Manufacturers commenced trading on $01$ March $2024$ with the intention of producing plastic chairs. During March

$2024$ the following transactions took place:

$20000$ chairs were manufactured of which $18000$ were sold at an introductory price of R$100$ each. Fixed manufacturing

costs amounted to R$250000$ whilst the variable manufacturing costs amounted to R$43$ per unit. Marketing costs included

R$43000$ for fixed costs as well as R$5$ per unit sold for delivery costs. Administration costs included salaries of R$50000$

and other office costs of R$4$ per unit sold.

During April $2024$ the sales and production increased to $22000$ units and $25000$ units respectively. The selling price

increased to R$120$ per chair. Variable manufacturing costs decreased to R$40$ per unit whilst other variable costs per unit

and the fixed costs remained unchanged. However, a sales commission of $5\%$ of sales was introduced with effect from

$01$ April $2024.$ The first$-$in$-$first$-$out method is used for valuing inventories.

Swann Manufacturers was using the absorption costing method to prepare its income statement but the financial

manager is now keen on using the variable costing method. Separate entries are made for marketing costs and

administration costs i$.$e$.$ these costs are not combined.

REQUIRED

$1.$ Prepare the Income Statement for the month ended $30$ April $2024$ using the variable costing

method.

$(10$ marks$)$

$2.$ Prepare the Income Statement for the month ended $30$ April $2024$ using the absorption costing

method.

$(10$ marks$)$

$3.$ Reconcile the profit calculated according to absorption costing $($in question $2)$ with the profit

calculated according to variable costing $($in question $1).$ Your answer must include the

calculation of the fixed manufacturing costs in the opening and closing inventories.

$(4$ marks$)$

$4.$ Calculate the product costs and period costs for the month ended $31$ March $2024$ using the

following methods. $($Ignore inventories.$)$

$4\mathrm{.}1$ Variable costing $(3$ marks$)$

$4\mathrm{.}2$ Absorption costing.