answer question 8

The company manufactured 15 000 and sold 14 000 units during November 2016, 1 000 units were in opening inventory at the beginning of that month. During December 2016, 16 000 units were manufactured and 17 000 units sold. to: REQUIRED: MARKS Compile separate income statements for the last month of 2016 according 7.1 i) the absorption costing method 16 ii) the variable costing method i) Reconcile the net profit obtained under 1.1 above. 7.2 ii) Explain why variable costing may be preferable in decision making 4 scenarios. TOTAL MARKS FOR QUESTION 7 20 Question 8 (15 marks, 27 minutes) Normal 2016 Tia Clothing (Pty) Ltd manufactures summer t-shirts made out of cotton. One kilogram of cotton costs N$150.00 per finished t-shirt. During the month of October 2016, 1 000 t-shirts were produced of which 90% were sold at N$ 600.00 each. It has taken three hours to manufacture one t-shirt at N$ 30.00 per hour. Variable manufacturing overhead cost per t-shirt amounted to N$ 57.00. Monthly total manufacturing overhead costs amounted to N$ 1000 000.00. During the same month, total fixed administrative costs amounted to N$ 115 000.00. A sales commission of five per cent is paid to the sales person for every t-shirt sold every month. There was no work in process or opening inventory at the beginning of October 2016. Required: Marks 8.1. Compute the production cost per unit according to: a) Absorption costing method 2 b) Marginal costing method 1.5 8.2. Prepare the Statement of Comprehensive Income for the month of October 2016 according to a) Absorption costing method 5 b) Marginal costing method 5.5 8.3. Reconcile the difference in profits (if there is any) 1 TOTAL MARKS FOR QUESTION 1 15 _ Question 9 normal 2017 (20 Marks, 36 Minutes) Page 9 of 71 PREVIOUS NEXT