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Madinare is planning to produce a new product called GTY which will be used in the construction industry. This selling price per unit of this
Madinare is planning to produce a new product called GTY which will be used in the construction industry. This selling price per unit of this product will be P
The following are the unit costs of GTY:
Direct materials:
container P; Chemical PN kgs at P per kg; Chemical QS kgs at P per kg
Direct labour: minutes at P per hour
Variable factory overhead: Absorbed at P per direct labour hour
Fixed factory overhead: P for the half year to June To be absorbed at a rate per unit.
Sales commission per each unit sold P
Fixed administrative costs will be P per annum.
The expected production and sales for the months ended June will be:
Production Units
Sales units, meaning units of GTY will remain as closing inventory
i Using marginal costing, showing all your workings, prepare a detailed income statement Statement of profit or loss account for the half year to June
ii Briefly explain any two weaknesses of using marginal costing
b You have just received an email from the Chief Accountant Mekki who now believes that fixed factory overhead costs of P is in fact a stepped fixed cost, and will change at each activity level of units.
i You are to elaborate your understanding of stepped fixed costs
ii You are also required to explain the effect of the above information on the cost per GTY unit at activity levels of and units.
c Edmore and Company has produced a standard cost card for its single product. The standards are given below:
Selling price per unit: P
Direct materials per unit: P
Direct labour per unit: P
Profit: P
For January the budgeted production and sales were units, while the actual sales were units.
You are required to find the flexed budget profit for January
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