for Absorption and marginal please follow the format given
Question 5 Technology Sdn Bhd is a manufacturer of Mini Bar Fridge for local market. One of the highly marketable type of Mini Bar Fridge is known as 'Light Fridge-6OL' and is sold for RM450 each The budgeted sales and production volumes are 18,000 units per annum. The standard cost of producing one unit of Light Fridge-60L is shown below. Direct Materials 2 units @ RM40 per unit Direct Labour 4 hours @ RM10 per hour Production overhead RM20 per unit Additional information 1. Variable selling and distribution cost is RM12.00 per unit. 2 One quarter of production overhead cost is variable costs, and the remaining is fixed costs 3. Other annual fixed costs for the year are as follows: Fixed selling and distribution cost RM120,000 General and administration costs RM650,000 4. Production and inventory data during the year 2020 is given below: Opening inventory on 1 January 2020 550 units Actual production 17,000 units Closing inventory on 31 December 2020 600 units a. Required: a i Prepare the income statement for the year ended 31 December 2020 using marginal costing and absorption costing approach. (14 marks) Reconcile the profits of the two income statements determined in (1) above. (2 marks) b. i. Briefly discuss three (3) uses of marginal costing approach. (3 marks) ii. State two (2) situations where the net profit will be the same under both costing approaches (2 marks) (Total: 21 marks) Absorption Costing Statement of Profit or Loss for the year ended 31 December 20XX Sales XXX Less: Cost of Good Sold Opening Stock ** XX + Full Production Costs: Direct materials XX Direct labour XX Variable production overhead XX Fixed production overhead XX Closing Stock (XX) XXX Gross Profit XXX Less: Expenses Fixed production overhead XX Fixed selling & distribution overhead XX Fixed administration overhead XX Variable selling & distribution overhead XX Variable administration overhead XX XXX Net Profit (Loss) XXX Adj for overl(under) absorption Fixed production overhead absorbed XX Fixed production overhead incurred XX XX Net Profit After Adjustment XXX **Opening stock and closing stock valuation = units x full production cost per unit Full production cost per unit = direct material + direct labour + variable production overhead + fixed production overhead Marginal Costing Statement of Profit or Loss for the year ended 31 December 20XX Sales XXX Less: Variable Cost of Sales: Opening Stock XX + Variable Production Costs: Direct materials XX Direct labour XX Variable production overhead XX Closing Stock Gross Margin XX Less: Variable selling & distribution overhead XX Variable administration overhead XX Contribution Margin XXX Less: Fixed Costs Fixed production overhead XX Fixed selling & distribution overhead XX Fixed administration overhead XX XX Net Profit (Loss) XXX Opening stock and closing stock valuation = units x variable production cost per unit Variable production cost per unit = direct material + direct labour + variable production overhead Question 5 Technology Sdn Bhd is a manufacturer of Mini Bar Fridge for local market. One of the highly marketable type of Mini Bar Fridge is known as 'Light Fridge-6OL' and is sold for RM450 each The budgeted sales and production volumes are 18,000 units per annum. The standard cost of producing one unit of Light Fridge-60L is shown below. Direct Materials 2 units @ RM40 per unit Direct Labour 4 hours @ RM10 per hour Production overhead RM20 per unit Additional information 1. Variable selling and distribution cost is RM12.00 per unit. 2 One quarter of production overhead cost is variable costs, and the remaining is fixed costs 3. Other annual fixed costs for the year are as follows: Fixed selling and distribution cost RM120,000 General and administration costs RM650,000 4. Production and inventory data during the year 2020 is given below: Opening inventory on 1 January 2020 550 units Actual production 17,000 units Closing inventory on 31 December 2020 600 units a. Required: a i Prepare the income statement for the year ended 31 December 2020 using marginal costing and absorption costing approach. (14 marks) Reconcile the profits of the two income statements determined in (1) above. (2 marks) b. i. Briefly discuss three (3) uses of marginal costing approach. (3 marks) ii. State two (2) situations where the net profit will be the same under both costing approaches (2 marks) (Total: 21 marks) Absorption Costing Statement of Profit or Loss for the year ended 31 December 20XX Sales XXX Less: Cost of Good Sold Opening Stock ** XX + Full Production Costs: Direct materials XX Direct labour XX Variable production overhead XX Fixed production overhead XX Closing Stock (XX) XXX Gross Profit XXX Less: Expenses Fixed production overhead XX Fixed selling & distribution overhead XX Fixed administration overhead XX Variable selling & distribution overhead XX Variable administration overhead XX XXX Net Profit (Loss) XXX Adj for overl(under) absorption Fixed production overhead absorbed XX Fixed production overhead incurred XX XX Net Profit After Adjustment XXX **Opening stock and closing stock valuation = units x full production cost per unit Full production cost per unit = direct material + direct labour + variable production overhead + fixed production overhead Marginal Costing Statement of Profit or Loss for the year ended 31 December 20XX Sales XXX Less: Variable Cost of Sales: Opening Stock XX + Variable Production Costs: Direct materials XX Direct labour XX Variable production overhead XX Closing Stock Gross Margin XX Less: Variable selling & distribution overhead XX Variable administration overhead XX Contribution Margin XXX Less: Fixed Costs Fixed production overhead XX Fixed selling & distribution overhead XX Fixed administration overhead XX XX Net Profit (Loss) XXX Opening stock and closing stock valuation = units x variable production cost per unit Variable production cost per unit = direct material + direct labour + variable production overhead
