QUESTION #4

The management of Pepsi's Lunch Shop is contemplating the use of Marginal or Absorption costing system. They would like to see what is involved in the preparation of each. The data below is for the year ended April 30, 2016 to prepare and sell an average meal:

Selling price per unit	$550
Labour cost per unit	$65
Direct material per unit	$70
Direct expense per unit	$45
Variable overheads per unit	$40
Fixed overheads (actual)	$30,000,000
Variable selling per unit	$50
Actual production	1,500,000
Actual sales	1,350,000

During the period the entity budgeted fixed overhead to be $36,000,000 and budgeted production of 1,500,000 meals. Overheads are absorbed on a per unit basis currently.

Required:

1. complete an income statement based on the Marginal Costing system.

1. complete an income statement based on the Marginal Costing system.

1. Reconciling profits between marginal costing and absorption costing.