For revision purpose only - Management Accounts

At the end of November 2021, XYZ Limited had 800 units of spandex in store. For the month of December 2021, the company budgeted to produce 10,000 units of the product at a selling price of $2,300 each.

Fixed production, administration and selling expenses were expected to be $2,000,000, $1,500,000 and $800,000 respectively.

During the month, the company produced 10,600 units of the product. On December 31, 2021, closing stock was 900 units of the product on hand.

The following cost information relating to the product was made available at the end of December 2021:

Cost per unit

Details	$
Direct material	400
Direct labour	500
Variable production overheads	300
Cost per unit	1,200

Required:

a). What was the contribution per unit of production for December 2021? (3 marks)

b). How many units of spandex were sold in December 2021? (3 marks)

c). Prepare an income statement to show the profit for December 31, 2021 using the marginal costing approach

(10 marks)

d). Prepare an income statement to show the profit for December 31, 2021 using absorption costing techniques.

(12 marks)

e). Reconcile the profits obtained from the costing approaches of both products

(2 marks)