1. Daffy Duck Enterprise produces prenatal vitamins at its factory. The following information relates to the production of the vitamins for the period ending 31 December 2020.
2. Production Sales
3. (Units) (Units)
4. Budgeted 15,000 14,500
5. Actual 16,000 15,500
6. Budgeted Actual
7. Fixed production cost $150,000 $156,250
8. Fixed selling overhead $112,500 $112,500
9. The fixed production overhead was absorbed in a pre-determined rate per unit produced. One prenatal vitamin was sold for $90. At the beginning of January 2020, there was an opening inventory of 875 units valued at $52,500; this includes a fixed production overhead of $8,750.
10. Required:
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12. (a) Prepare a marginal costing income statement for the company.
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14. (b) Prepare an absorption costing income statement for the company.
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16. (c) Reconcile the income under both statements.
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18. (d) Distinguish between variable costing and absorption costing.