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Intermediate: Preparation of variable and absorption costing profit statements andCVP analysisR Limited is considering its plans for the year ending 3 1 December 2 0
Intermediate: Preparation of variable and absorption costing profit statements andCVP analysisR Limited is considering its plans for the year ending December It makes and sells a single product, which has budgeted costs and selling price as follows: per unitSelling priceDirect materialsDirect labourProduction overhead:variablefixedSelling overhead:variablefixedAdministration overhead:fixedJanuaryFebruaryunitsunitsSalesProductionFixed overhead costs per unit are based on a normal annual activity level of units. These costs are expected to be incurred at a constant rate throughout the year.Activity levels during January and February are expected to be:Assume that there will be no stocks held on January Required:a Prepare, in columnar format, profit statements for each of the two months of January and February using:i absorption costing; ii marginal costing. marksb Reconcile and explain the reasons for any differences between the marginal and absorption profits for each month which you have calculated in your answer toa above. marksc Based upon marginal costing, calculate:i the annual breakeven sales value; andii the activity level, in units, which will yield an annual profit of marksd Explain fundamental assumptions underpinning single product breakeven analysis. marksTotal marksCIMA Stage Operational Cost Accounting
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