QUESTION 12

1. Baggy Green Co. produces cricket kits for amateur and backyard cricket enthusiasts.Last year, the company reached its planned production of 20,000 kits and sold all but 2,000 kits.The kits sell for $50 each.Costs incurred in the production of the kits are as follows:
2. Materials used
3. 40,000
4. Other Variable production costs
5. 60,000
6. Fixed production costs
7. 100,000
8. Variable selling costs
9. 18,000
10. Fixed selling and administrative costs
11. 100,000
13. Baggy Green Co. uses a normal costing system.
14. Required:
15. Prepare an income statement under (i) variable costing and (ii) absorption costing (10 marks)
16. Reconcile the differences in reported income under variable and absorption costing.Explain how the differences occur (5 marks)