QUESTION 4 MARGINAL COSTING 25 MARKS Rother & Huli (Pty) Ltd (RH) currently operates one specialized coffee boutique situated in Thohoyandou, priding itself on serving only premium brand coffee. The company has been growing steadily over the past few years. It has now decided to appoint a full time management accountant as it wants to franchise the concept across the country and introduce a new coffee brand. RH (Pty) Ltd. has produced the following budgeted figures for a new product which it hopes to launch Direct Material R10 per unit Direct Labour R5 per unit Variable Production Overhead R8 per unit Fixed Production Overhead R27,000 per month Budgeted Output 9,000 units per month Selling Price R30 per unit The following levels of activity took place over the first two months of the products life Month 1 Month 2 Production units 9,000 10,000 Sales units 8,500 9,500 Note: Actual prices and costs were the same as budgeted for the first two months Required: 4.1. Calculate the standard cost per unit and standard profit per unit under Absorption costing principles (4 Marks) Prepare a profit statement for each month (separately) on each of the following basis: 4.2 4.3 4.2.1 Absorption Costing 4.2.2 Marginal Costing (16 Marks) Prepare a reconciliation of the difference in profit reported in the profit statements prepared in part (b) above. (3 Marks) Clearly explain the reason for the difference in reported profit under the two methods (2 Marks) 4.4 51 Page