Question
Babyland Ltd produces a baby product called Cutie which has a variable production cost of $5 per unit and a selling price of $10 per
Babyland Ltd produces a baby product called Cutie which has a variable production cost of $5 per unit and a selling price of $10 per unit. There were no opening inventories in Period 1 and the budgeted and actual fixed production overheads amounted to $50,000 at a normal activity level of 20,000 units for each period. Actual fixed administration, selling and distribution overheads amounted to $12,000 per period. The following information relates to Cutie for two periods.
Period Production Sales 1 20,000 20,000 2 20,000 15,000
Required:
b) Comment on the net income based on both methods. ( 7 marks )
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