QUESTION $1$

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 $1$ 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

$1\mathrm{.}1$ 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.

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

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.

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.

Question $2$

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 @ R$15$ per

unit

$5$ Purchase $135$ units @ $20$ per unit

$9$ Issue to production $95$ units

$11$

Purchase $30$ units @ R$16$ per unit

$16$ Purchase $78$ units @ R$17$per unit

$20$ Issue to production $125$ units

$30$ Issue to production $65$ units