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QUESTION 1 ( 2 0 Marks ) A company manufactures and sells a single product. Budgeted data per unit of the product is: R Selling

QUESTION 1(20 Marks)
A company manufactures and sells a single product. Budgeted data per unit of the product is:
R
Selling Price
8.50
Variable Cost*
3.70
Fixed Production overhead
2.90
*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 R16,800 per period.
Actual sales and production for two periods has been:
Period 1 Period 2
Sales 11600 units 12400 units
Production 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
1.1 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 (1.1) above with those that would be reported using
marginal costing.
1.2 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)
1.3 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
50 units @ R15 per
unit
5 Purchase 135 units @ 20 per unit
9 Issue to production 95 units
11 Purchase
30 units @ R16 per
unit
16 Purchase 78 units @ R17per unit
20 Issue to production 125 units
30 Issue to production 65 units
THE EN

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