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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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