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QUESTION 5 (20 Marks) The following information was extracted from the accounting records of Nokia Manufacturers for the year ended 31 March 2020: Units Inventory
QUESTION 5 (20 Marks) The following information was extracted from the accounting records of Nokia Manufacturers for the year ended 31 March 2020: Units Inventory at the beginning of the year Nil Production for the year 19 000 Sales for the year (at R80 per unit) 17 200 Direct materials cost per unit Direct labour cost per unit Variable manufacturing overheads per unit Variable selling and administrative cost per unit Fixed manufacturing overhead cost Fixed selling and administrative cost R 20 12 8 5 197 000 98 000 Nokia Manufacturers uses the first-in-first-out method of stock valuation. REQUIRED 5.1 Prepare the Income statement for the year ended 31 March 2020 using the marginal costing method. (9 marks) 5.2 Prepare the Income statement for the year ended 31 March 2020 using the absorption costing method. (9 marks) 5.3 Explain why the net profit according to the absorption costing method is greater than the marginal costing method. (2 marks)
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