Question 1 Ryan Pty Ltd produces and sells a single product and uses predetermined overhead rates based on normal capacity to apply overhead. At 1 July 2014 it had a finished goods inventory of 20,000 units. Management would like a comparison with direct costing so as to be able to evaluate its variable costs more easily. Beginning inventory had the same unit cost as inventory produced during the year. The company annual record shows: Normal Capacity Production (actual) Units 96,000 100,000 Sales (actual) 90,000 Budgeted Costs Fixed Factory Overhead Variable Factory Overhead 264,000 182,400 22.00 Actual Selling Price Per Unit Actual Variable Costs Per Unit - Direct Material - Direct Labour - Factory Overhead - Selling and Administration Expenses 5.00 5.00 2.00 3.00 Actual Fixed Costs in Total - Factory Overhead - Selling and Administrative Expense 300,000 80,000 Required: (a) Unit cost to value closing inventory under both Direct and Absorption Costing. (b) Income Statement for year ended 30 June 2015 using Absorption Costing. (c) Income Statement for year ended 30 June 2015 using Direct Costing. (d) Reconcile the Net Profits derived under both methods e) How the product costs is treated differently in Direct & Absorption costing