Fabien Ltd - continued:| Trading (production and sales): You should assume that today is Monday 23rd November 2020. Sales: The company has the following sales orders to be delivered during December 2020. Order 1101 Order 1102 Order / product: 'Sky' 'Sun' Quantity to be delivered (sales in units) Selling price (per unit) 90 35 Order 1103 'Moon' 1,150 55 650 950 Production: The production schedule for December 2020 (product quantities and production resources requirement) is shown below. Order 1101 Order 1102 Order 1103 Order / product: 'Sky' 'Sun' 'Moon' Finished goods: 790 1,000 1,320 Quantity to be produced Note: At 1st December 2020 there will be no opening inventory of finished goods. 1 Resources requirement for production: Direct costs (variable costs): Order / product: Order 1101 'Sky' Order 1102 'Sun' Order 1103 "Moon' Totals 1,440 720 1,150 3,310 Machining department: Incremental materials cost Direct labour hours (total) Machine hours (total) 102 144 72 318 hours 186 221 144 551 hours 864 1,740 288 Painting department: Incremental materials cost Direct labour hours (total) Machine hours (total) 144 114 90 2,892 348 hours 204 hours 114 60 30 1,150 720 Assembly department: Incremental materials cost Direct labour hours (total) Machine hours (total) 1,150 216 258 204 3,020 678 hours 234 hours 60 72 102 Fabien Ltd - continued: Fixed indirect production overheads: Indirect production overheads are fixed (unaffected by production activity levels) at 34,680 per month. This value has been allocated and apportioned to the 3 production departments as follows: Total Production department: Machining Fixed costs (allocation / apportionment) 19,400 Painting 8,600 Assembly 13,500 41,500 Bases for absorption: Machining department = Machine hours Painting department = Direct labour hours Assembly department = Direct labour hours Note: The quantity for absorption basis (for each production department) should be established using the total departmental resources requirement shown in the tables above. Required: Fabien Ltd - continued: Required Task 3: Prepare the following planned values: a. Contribution and contribution / sales ratio (for each product and in total) and the gross profit (in total only see note) 7 Marks b. Prepare a reconciliation to explain the difference between the total gross profits established using an absorption costing system (task 2 d.) and a marginal costing system (task 3 a.) 7 Marks Note to task 3 a. & b.: The requirement of task 3 should be established using a marginal costing system where: All direct costs are classified as variable All indirect production overheads are classified as fixed The total task 3 mark above, includes marks allocated to short descriptive notes to workings (
