Question 1

The management accountant of F4 Sdn. Bhd. has prepared the monthly budget information for June 2021 as follows: Production volume (units) 80,000 Sales volume (units) 76,000 Opening inventories (units) 4,000 Selling price (RM) 160 Variable production overheads (RM per unit) in full 8 Direct materials (RM per unit) 20 Direct labour (RM per unit) 12 Variable selling and distribution overheads (RM) 5% of sales revenue Fixed selling and distribution overheads (RM) 720,000 per annum The fixed production overheads are absorbed at RM20 per unit based on the budgeted production volume of 88,000 units per month. Actual fixed production overheads incurred per month are the same as the budgeted amount.

Required:

(a) Calculate the closing inventory (in units) and the actual fixed production overheads incurred per month. (2 marks)

(b) Calculate the product cost per unit using:

(i) Absorption costing principle; (2 marks)

(ii) Marginal costing principle. (1 mark)

(c) Prepare the profit statement for June 2021 using:

(i) Absorption costing principle; (9 marks)

(ii) Marginal costing principle. (7 marks)

(d) Reconcile the difference in net profits between the profit statements prepared using absorption costing and marginal costing principles. (4 marks)