Calculate costs using appropriate techniques of cost analysis to prepare an income statement usingvariable and absorption costs.

UCK Furniture produce one product - desks.

Each desk is budgeted to require 4 kg of wood at 3 per kg, 4 hours of labour at 2 per hour, and variable production overheads of 5 per unit.

Fixed production overheads are budgeted at 20,000 per month and average production is estimated

to be 10,000 units per month.

The selling price is fixed at 35 per unit. There is also a variable selling cost of 1 per unit and fixed

selling cost of 2,000 per month.

During the first two months X plc expects the following levels of activity:

February

January

11,000 units

Production

9,500 units

11,500 units

Sales

9,000 units

(a) Prepare an income statement using absorption costing and variable costing .

b. Accurately apply a range of management accounting techniques and produce a financial reporting

document.

c. Produce financial reports that accurately apply and interpret data for a range of business activities.

Make the interpretation of the both costing methods and explain the potential merits and demerits of

the both methods.