QUESTION $1$

$(20$ Marks$)$

A company manufactures and sells a single product. Budgeted data per unit of the product is:

R

Selling Price

$8\mathrm{.}50$

Variable Cost$*$

$3\mathrm{.}70$

Fixed Production overhead

$2\mathrm{.}90$

$*$All variable costs are manufacturing i$.$e there are no non$-$manufacturing variable costs.

The above fixed production overhead absorption rate is based on budgeted production of $12,000$ units per period.

Budgeted non$-$production overhead $($all fixed$)$ is R$16,800$ per period.

Actual sales and production for two periods has been:

Period $1$

Sales

Period $2$

$11600$ units

Production

$12400$ units

$12000$ units

$12300$ units

There was no stock at the start of Period $1.$ The selling price, unit variable costs and total fixed costs were as per

budget in both periods.

REQUIRED

$1\mathrm{.}1$ Prepare statements of Comprehensive income for both periods $($ie period $1$ & Period $2),$ using absorption costing,

showing the actual results for each of the two periods.

$(7)$

The company wishes to compare the results reported in $(1\mathrm{.}1)$ above with those that would be reported using

marginal costing.

$1\mathrm{.}2$ Prepare the statement of comprehensive income for periods $($ie period $1$ & Period $2),$ using marginal costing,

showing the actual results for each of the two periods.

$(7)$

$1\mathrm{.}3$ Explain fully why the profits reported in period $1$ differ when profit is calculated using absorption costing and

marginal costing. Calculations are required to support your explanation.

$(6)$

Question $2$

$(10$ Marks$)$

Use the following information to calculate the value of inventory on hand on April $30$ and issue price to

production during April using FIFO inventory system.

$01-$April

Beginning Inventory

$5$

Purchase

$50$ units @ R$15$ per

unit

$135$ units @ $20$ per unit

$9$

Issue to production

$11$

Purchase

$16$

Purchase

$95$ units

$30$ units @ R$16$ per

unit

$20$

$78$ units @ R$17$per unit

Issue to production

$30$

$125$ units

Issue to production

$65$ units