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Question 3 (25 marks) The following budgeted data relates to ALT Ltd. for the period ending December 31, 2020. Production (units) Sales (units) Opening
Question 3 (25 marks) The following budgeted data relates to ALT Ltd. for the period ending December 31, 2020. Production (units) Sales (units) Opening stock (units) 44,000 52,000 20,000 The company incurred material, labour and production and selling overheads per unit as follows: Direct material Direct labour $200 $320 Variable production overheads Variable selling and distribution $150 $120 The annual fixed production overheads are budgeted to be $800,000 and the company expects to produce 40,000 units of aprons each year. Overheads are absorbed on a per unit basis. Actual overheads are $860,000 per year. Actual fixed administration cost is $450,000 per year. The selling price per unit is $900. Required: (a) Prepare the marginal costing and the absorption costing income statements clearly showing the difference in treatment of stock for the period ending December 31, 2020. (17 marks) (b) Reconcile the income under both statements. (2 marks) (c) Discuss three (3) ways in which variable costing differs from absorption costing. (6 marks)
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