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Question Five A company produces a single product and has the following standard unit cost: 30 Variable costs: Direct Materials Direct Labour Variable Production Overhead
Question Five A company produces a single product and has the following standard unit cost: 30 Variable costs: Direct Materials Direct Labour Variable Production Overhead Variable Selling & Distribution Overheads 15 9 3 Budgeted fixed costs for the year are as follows: 90,000 Fixed production overhead Fixed selling and distribution overhead Fixed administration expenses 30,000 15,000 Fixed production overhead costs are absorbed into the cost of production at a unit rate based on normal activity of 10,000 units per year. There is no opening inventory at the beginning of the year, 11,000 units are produced during the year and 10,000 units are sold during the year. The selling price is 90 per unit. Actual costs and revenues are as per budget. Required a. Prepare a profit and Loss Statement for the year using Marginal Costing. (40 marks) b. Prepare a profit and Loss Statement for the year using Absorption Costing. (40 marks) C. Explain with a reconciliation why there is a difference between the net profit figures. (20 marks)
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