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Question 2 (Total: 25 marks) Belian Sdn Bhd developed the following standard unit costs at 100% of its normal production capacity, which is 50,000 units
Question 2 (Total: 25 marks) Belian Sdn Bhd developed the following standard unit costs at 100% of its normal production capacity, which is 50,000 units per year : Direct materials Direct labour Variable factory overhead Fixed factory overhead RM 6 3 1 5 15 The selling price of each unit of product is RM25. Variable commercial expenses are RM1 per unit sold, and fixed commercial expenses total RM180,000 for the period. During the year , 49,000 units were produced and 52,000 units were sold. There are no work in process, beginning or ending inventories, and finished goods inventory is maintained at standard cost, which has not changed from the preceding year. For the current year, there is a net unfavorable variable cost variance in the amount of RM2,000. All standard cost variances are charged to cost of goods sold at the end of the period. Required: a) Prepare a comprehensive income statement on the absorption costing basis. (6 marks) b) Prepare a comprehensive income statement on the direct costing basis. (3 marks) c) Compute and explain the difference in operating income for the current year under absorption and direct costing. (3 marks) d) Gross profit and contribution margin are different measures. Demonstrate the differences between these two measures and advise in which circumstance would it be preferable to use one rather than the other. (13 marks)
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