Question 4

The following data relates to periods 1 to 4 of a manufacturing company producing a single product: -

	(RM)
Variable production cost per unit	10
Selling price per unit	50
Fixed production overhead per period	6,000

Normal activity is 500 units and production and sales for the four periods are as follows: -

Period 1 units Period 2 units Period 3 units Period 4 units

Sales	500	500	400	500
Production	500	500	500	450

There were no opening stocks at the start of period 1.

Required:

1. Prepare a profit statement for each of the periods 1 to 4, based on the variable costing system. (10 marks)
2. Prepare a profit statement for each of the periods 1 to 4, based on the traditional absorption costing system. (10 marks)
3. Within periods 1 4, if reported profits are different between the variable and traditional absorption costing systems, show computations on how the profits may be reconciled. (5 marks)

[Total: 25 Marks]