QUESTION NO. 01: Marginal & Absorption Costing (10 Marks) ABC Ltd is considering using direct costing method for decision making instead of absorption costing method. Following data has been summarized for that purpose: Variable costs per unit are: Rs. Direct Material 3.00 Direct Labour 2.25 Variable Factory Overhead 0.75 Total 6.00 Normal Capacity of plant is 20,000 units per month or 240,000 units a year. Actual and applied variable overheads are the same. Likewise no material or labour variance exists. There is no work in process. Standard costs and finished goods inventories in units are: MONTH January February March April Units in beginning inventory 3,000 1,000 Units produced 17,500 21, 00019, 000 20,000 Units sold 17,500 18,000 21 000 16,500 Units in ending inventory 3,000 1000 4,500 Fixed overheads are Rs. 300,000 per year or Rs. 1. 25 per unit at normal capacity. Company is using units of product' as basis for applying overheads. Fixed marketing and administrative expenses are Rs. 60, 000 per year and variable marketing expenses are Rs. 3,400, RS. 3,600, RS. 4,000 and Rs. 3,000 for the first second third and fourth month respectively. Required: a) b) Prepare income statement through Direct Costing methods for the month of March Prepare income statement through Absorption for the month of March QUESTION NO. 01: Marginal & Absorption Costing (10 Marks) ABC Ltd is considering using direct costing method for decision making instead of absorption costing method. Following data has been summarized for that purpose: Variable costs per unit are: Rs. Direct Material 3.00 Direct Labour 2.25 Variable Factory Overhead 0.75 Total 6.00 Normal Capacity of plant is 20,000 units per month or 240,000 units a year. Actual and applied variable overheads are the same. Likewise no material or labour variance exists. There is no work in process. Standard costs and finished goods inventories in units are: MONTH January February March April Units in beginning inventory 3,000 1,000 Units produced 17,500 21, 00019, 000 20,000 Units sold 17,500 18,000 21 000 16,500 Units in ending inventory 3,000 1000 4,500 Fixed overheads are Rs. 300,000 per year or Rs. 1. 25 per unit at normal capacity. Company is using units of product' as basis for applying overheads. Fixed marketing and administrative expenses are Rs. 60, 000 per year and variable marketing expenses are Rs. 3,400, RS. 3,600, RS. 4,000 and Rs. 3,000 for the first second third and fourth month respectively. Required: a) b) Prepare income statement through Direct Costing methods for the month of March Prepare income statement through Absorption for the month of March