Information about the Product MAXIF company manufactures different types of office furniture. Currently, they are manufacturing study table, computer table and bookshelves, as they are in maximum demand. All products are manufactured on a factory site. The company brand is recognized globally, and the products are acknowledged as premium quality. Finance and Manufacturing information: The financial information systems are integrated with the production and inventory systems. MAXIF is able to generate information from daily sales and production cost data to the comprehensive management accounts and annual financial statements. The company operates a standard absorption costing system and departmental overhead absorption rates are applied based on machine hours. Following information is provided by Ms. Amal (Finance officer) about its highest selling product Study table for the month of February. Budgeted cost per box: OMR 60 TO 65 (Choose Selling price between these numbers) Direct material Direct Labour Variable production Overhead 36 5 3 Fixed production overhead for one month is estimated to be OMR 40,000 and budgeted production for the month was 5000 tables. In the month of January, the sale was lower than expected. Opening stock for the month of February was 200 units. the actual production was 5100 units for the month of February. Actual sales were 5000 units. Administration and selling overheads are OMR 20,500 to 21,000 (Choose between these numbers) Question 3 8 Marks Using the above data, calculate profit for the month of February using: 1) Absorption Costing ii) Marginal costing Production director has asked Ms. Amal whether the costing systems used above are fit for the Company. He wants to know which method gives a higher profit as per the above calculation even though the Revenues are the same. He is also asking why company is using absorption costing as he has heard it has many weaknesses. Question 4 4 Marks Evaluate the reasons for the difference between the marginal and absorption profits shown in the above statements. Question 5 5 Marks Explain the benefits of using absorption costing method to our business. Information about the Product MAXIF company manufactures different types of office furniture. Currently, they are manufacturing study table, computer table and bookshelves, as they are in maximum demand. All products are manufactured on a factory site. The company brand is recognized globally, and the products are acknowledged as premium quality. Finance and Manufacturing information: The financial information systems are integrated with the production and inventory systems. MAXIF is able to generate information from daily sales and production cost data to the comprehensive management accounts and annual financial statements. The company operates a standard absorption costing system and departmental overhead absorption rates are applied based on machine hours. Following information is provided by Ms. Amal (Finance officer) about its highest selling product Study table for the month of February. Budgeted cost per box: OMR 60 TO 65 (Choose Selling price between these numbers) Direct material Direct Labour Variable production Overhead 36 5 3 Fixed production overhead for one month is estimated to be OMR 40,000 and budgeted production for the month was 5000 tables. In the month of January, the sale was lower than expected. Opening stock for the month of February was 200 units. the actual production was 5100 units for the month of February. Actual sales were 5000 units. Administration and selling overheads are OMR 20,500 to 21,000 (Choose between these numbers) Question 3 8 Marks Using the above data, calculate profit for the month of February using: 1) Absorption Costing ii) Marginal costing Production director has asked Ms. Amal whether the costing systems used above are fit for the Company. He wants to know which method gives a higher profit as per the above calculation even though the Revenues are the same. He is also asking why company is using absorption costing as he has heard it has many weaknesses. Question 4 4 Marks Evaluate the reasons for the difference between the marginal and absorption profits shown in the above statements. Question 5 5 Marks Explain the benefits of using absorption costing method to our business