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.

2.1

Use the information provided below to calculate the following variances for May 2021. Each answer

must indicate whether the variance is favourable or unfavourable.

2.2 (9 marks)

2.2.1 Material quantity variance (3 marks)

2.2.2 Labour efficiency variance (3 marks)

2.2.3 Total labour variance (without using the labour rate or efficiency variances) (3 marks)

INFORMATION

The expected production and standard costs for each unit of Product A manufactured by Luton

Manufacturers are as follows:

Expected production 30 000 units

Direct material 15 kg at R8.60 per kg

Direct labour 3 hours at R8 per hour

Actual figures of Luton Manufacturers for Product A for May 2021 are as follows:

Production 27 500 units

Direct material used 432 000kg at R8.40 per kg

Direct labour incurred 80 000 hours at R8.40 per hour