Question 2

Sunshine Products Ltd. had the following information available for the month of December 2014.

Sales price $30

Manufacturing Costs:

Direct materials $8

Labour costs $4

Variable overheads $6

Fixed overheads $4 600

Selling and Administrative Costs:

Variable $2 500

Fixed $1 500

Production quantity 1 400 units

Quantity sold 1 200 units

Required:

(a). Prepare an Income Statement for December 2014 using marginal costing.

(b). Prepare an Income Statement for December 2014 using absorption costing.

(c). Reconcile the marginal costing and absorption costing net income figures in (a) and (b) above for

December 2014.