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Fresh Food Corner, is a small scale single owner business which produces and sells value added food item. The following information was extracted from the
Fresh Food Corner, is a small scale single owner business which produces and sells value added food item. The following information was extracted from the books of Fresh Food Corner for the month of June 2021. The budgeted fixed production cost per unit was based on a normal capacity of 12,000 units per month. The actual production was 10,000 units. The actual sales volume of Page 1 of 5 the month of June was similar to the actual production during the month. There was no any closing inventory at the end of May 2021. The Fresh Food Corner uses the Absorption costing technique. Any over/under absorption of fixed overheads is debited /credited to the Income Statement each month. You are required to; Calculate the actual profit for the month of June 2021 of the Fresh Food Corner using the absorption costing technique. State the theoretical justification for using absorption costing to deal with the problem of overheads. (10 Marks)
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