prepare the Income statement of Cambridge Manufacturers for the year ended 31 March 2021

using the absorption costing method.

(11 marks)

INFORMATION

The following information was extracted from the accounting records of Cambridge Manufacturers for the year ended

31 March 2021:

Inventory on 01 April 2020 1 000 units

Production for the year 30 000 units

Sales for the year (at R240 per unit) 25 000 units

Costs:

Direct materials cost per unit R60

Direct labour cost per unit R36

Variable manufacturing overheads cost per unit R24

Variable selling and administrative costs per unit sold R12

Fixed manufacturing overhead cost R696 000

Fixed selling and administrative cost R303 200

Additional information

The total manufacturing costs per unit for the year ended 31 March 2020 amounted to R130, comprising R110

for variable manufacturing costs and R20 for fixed manufacturing costs. The total selling and administrative

costs per unit for the same period amounted to R10.

The first-in-first out method of inventory valuation is used.