QUESTION 2 MARGINAL/ABSORPTION COSTING (30 marks) The following information was extracted from the accounting records of Minu Ltd for the year ended 30 Nov 2011 and from their budget for the year ending 30 Nov 2012 Actual Budget 2011 2012

Units Units Stock at beginning of the year 4 000 17 000

Production during the year 86 000 80 000

Sales during the year 73 000 78 000

Rand Rand

Selling price per unit 25 30

Manufacturing cost: Variable cost per unit 10 13

Fixed (total) 154 800 195 000

Admin and selling cost:

Fixed (total) 280 000 276 000 NB: Stock is valued according to the first in first out method. The value of opening stock for 2005 was R56000 Required:

Draft the budgeted income statement for the budgeted financial year ending 30 Nov 212 according to

a) The direct (marginal) costing method (10 Marks)

b) The absorption costing method (11 Marks)

c) Reconcile the profits between the two methods (9 Marks)