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Dexter Corporation produces and sells a single product, a wooden hand loom for weaving small items such as scarves. Selected cost and operating data relating
Dexter Corporation produces and sells a single product, a wooden hand loom for weaving small items such as scarves. Selected cost and operating data relating to the product for two years are given below:
Selling price per unit | P500 |
Direct materials | P110 |
Direct labor | P60 |
Variable manufacturing overheads | P30 |
Fixed manufacturing overheads per year | P1 200 000 |
Variable selling and administrative costs | P40 |
Fixed selling and administrative costs | P700 000 |
Units in beginning inventory | 2 000 |
Units produced during the year | 6 000 |
Units sold during the year | 8 000 |
Units in ending inventory | 0 |
Required:
a. Prepare an income statement under absorption costing. (8 marks)
b. Prepare an income statement under marginal costing. (8 marks)
c. Reconcile the marginal costing and absorption costing net operating incomes. (4 marks)
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