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Best Bakery Limited manufactures one product, nutricake. For the month of January 2022, the following information is available: units Number of nutricake produced 4,000 Number
Best Bakery Limited manufactures one product, nutricake. For the month of January 2022, the following information is available:
|
| units |
Number of nutricake produced |
| 4,000 |
Number of nutricake sold |
| 3,000 |
Selling for each nutricake | $8.00 |
|
Direct materials for the month | $5,000 |
|
Direct labour for the month | $9,000 |
|
Fixed production overhead for the month | $6,000 |
|
There was no finished stock at the start of the month. Both direct materials and direct labour behave as variable costs.
You are required to
- Define marginal and absorption costing. (3 marks)
- prepare profit statements using the
- Marginal costing approach (6 marks)
- Absorption costing (traditional) approach (6 marks)
- Reconcile the profits between absorption costing and marginal costing for the month of January. (6 marks)
- Outline 3 differences between marginal costing and absorption costing. (3 marks)
- State 3 arguments for marginal costing (3 marks)
- State 3 arguments for absorption costing (3 marks)
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