Question
Mary commenced business in January 2019, manufacturing a single product. At the end of 2019 she calculated her profit using the absorption costing method and
Mary commenced business in January 2019, manufacturing a single product. At the end of 2019 she calculated her profit using the absorption costing method and was pleased with the profits that were realised. However, she recently read that preparation of the income statement according to the marginal costing method would be more beneficial to her. She also learnt that if there are opening or closing inventories, then the profits calculated using the two methods would be different. She forecasted her sales and costs for July to December 2021 and wanted to undertake cost-volume-profit (CVP) analysis since it made use of the marginal costing approach with which she was impressed.
QUESTION 1 REQUIRED Prepare the Income Statement of Marys Manufacturers the year ended 31 December 2020 using the: 1.1 Marginal costing method. (10 Marks)
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