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New Ventures Lid of Mombam have organized a new division to specially coded cellular telephones. The division monthly costs are shown Manufacturing costs: Variable
New Ventures Lid of Mombam have organized a new division to specially coded cellular telephones. The division monthly costs are shown Manufacturing costs: Variable costs per units: Direct materials Variables manufacturing overhead Fixed manufacturing overhead costs (total) Selling and administration costs: Variable Fixed (total) Kshs.48 Kshs.2 Kshs.360,000 12% of sales Kshs.470,000 News ventures Ltd regards all of its workers as full time employees and the company t company includes its labour costs in its fixed manufacturing overhead. The cellular phones long-standing no lay off policy. Furthermore, production is highly automated. According for Kshs.150 each. During September, the first month of operations, the following activity w recorded: Unit produced Units sold 12,000 10,000 1 Required; 1. Compute the unit product cost under: a) Absorption costing b) Variable costing. (3 marks 2. Prepare an absorption costing income statement for September. (8 mars 3. Prepare a contribution format income statement for September using costing. Assume that the company must obtain additional financing in order to co operations. As a member of top management would you prefer to reb statement in (2) above or in (3) above when meeting with a group of prepa investors? Reconcile the absorption costing and variables costing net operating in! (2) and (3) above. [Total: 25 mark
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