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Question 3 The following data has been compiled for a product made by Schumacher Ltd. The budgeted annual production is 13,500 units and the

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Question 3 The following data has been compiled for a product made by Schumacher Ltd. The budgeted annual production is 13,500 units and the fixed production overhead is budgeted as 54,000 per annum. The product's selling price is 35 per unit and there is a variable selling cost of 8 per unit. Fixed administration overheads are estimated to be 1,800 per quarter. There was no opening stock at the beginning of January and during the month, the company produced 1,100 units and sold 985 units. Unit marginal and absorption costs are as follows: Marginal Absorption () Direct materials 3 Direct wages 6 Variable production overhead 2 11 Fixed production overhead E3625 () 11 4 Unit cost 11 15 Required: (a) Calculate total profit for January using Marginal Costing. (4 marks) (4 marks) (b) Calculate total profit for January using Absorption Costing. (c) Explain the difference in profits between the marginal costing and the absorption costing calculations you have made in (a) and (b) above. (2 marks) (Total marks for question 3: 10 marks)

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