QUESTION 4 [25 MARKS] The following budgeted profit statement has been prepared using absorption costing principles. January to June 2017 July to December 2017 Sales Opening inventory Production costs: Direct materials Direct labour Overhead Closing Inventory Gross profit Production overhead: (over)/under absorption Selling costs Distribution costs Administration costs Net profit Sales units Production units BWP000 100 108 162 90 460 160 (12) 50 45 80 15,000 18,000 BWP000 540 300 240 163 77 BWP000 160 36 54 30 280 80 12 50 40 80 10,000 6,000 BWP000 360 200 160 182 (22) The members of the management team are concerned by the significant change in profitability between the two six-months periods. As a management accountant, you have analysed the data upon which the above budget statement has been produced, with the following results. The production overhead cost comprises both a fixed and a variable element. The latter appears to be dependent on the number of units produced. The fixed element of the cost is expected to be incurred at a constant rate throughout the year. The selling costs are fixed. The distribution cost comprises both fixed and variable elements. The latter appears to be dependent on the number of units sold. The fixed element of the sot is expected to be incurred at a constant rate throughout the year. The administration costs are fixed. Required: Present the above budgeted profit statement in marginal costing format. (25 marks)

162 JUESTION 4 125 MARKSI The following budgeted profit statement has been prepared using absorption costing principles. January to June 2017 July to December 2017 BWP7000 BWP'000 BWP'000 BWP'000 Sales 540 Opening inventory 360 100 Production costs: 160 Direct materials 108 Direct labour 36 Overhead 54 90 30 460 Closing Inventory 280 160 80 Gross profit 300 200 Production overhead: 240 160 (overy under absorption Selling costs Distribution costs 12 SO Administration costs 50 45 40 80 Net profit 80 182 Sales units 27 (22) Production units 15,000 10,000 18,000 6,000 (12) 163 The members of the management team are concerned by the significant change in profitability between the two six-months periods. As a management accountant, you have analysed the data upon which the above budget statement has been produced, with the following results. The production overhead cost comprises both a fixed and a variable element. The latter appears to be dependent on the number of units produced. The fixed element of the cost is expected to be incurred at a constant rate throughout the year. The selling costs are fixed. The distribution cost comprises both fixed and variable elements. The latter appears to be dependent on the number of units sold. The fixed element of the sot is expected to be incurred at a constant rate throughout the year. The administration costs are fixed. Required: Present the above budgeted profit statement in marginal costing format. (25 marks) 162 JUESTION 4 125 MARKSI The following budgeted profit statement has been prepared using absorption costing principles. January to June 2017 July to December 2017 BWP7000 BWP'000 BWP'000 BWP'000 Sales 540 Opening inventory 360 100 Production costs: 160 Direct materials 108 Direct labour 36 Overhead 54 90 30 460 Closing Inventory 280 160 80 Gross profit 300 200 Production overhead: 240 160 (overy under absorption Selling costs Distribution costs 12 SO Administration costs 50 45 40 80 Net profit 80 182 Sales units 27 (22) Production units 15,000 10,000 18,000 6,000 (12) 163 The members of the management team are concerned by the significant change in profitability between the two six-months periods. As a management accountant, you have analysed the data upon which the above budget statement has been produced, with the following results. The production overhead cost comprises both a fixed and a variable element. The latter appears to be dependent on the number of units produced. The fixed element of the cost is expected to be incurred at a constant rate throughout the year. The selling costs are fixed. The distribution cost comprises both fixed and variable elements. The latter appears to be dependent on the number of units sold. The fixed element of the sot is expected to be incurred at a constant rate throughout the year. The administration costs are fixed. Required: Present the above budgeted profit statement in marginal costing format. (25 marks)