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Question 4 The following data relates to periods 1 to 4 of a manufacturing company producing a single product: - (RM) Variable production cost per
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:
- Prepare a profit statement for each of the periods 1 to 4, based on the variable costing system. (10 marks)
- Prepare a profit statement for each of the periods 1 to 4, based on the traditional absorption costing system. (10 marks)
- 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]
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