Question

The standard cost card for one unit of product L is:

$

Selling Price 45

Direct material 15

Direct labor 7

Variable production overheads 2

Variable selling overheads 1

Fixed production overheads 6

Fixed selling overheads 2

Total cost 33

Budgeted fixed overhead costs are $60,000 per annum charged at a constant rate each month.

Budgeted production is 30,000 units per annum.

In a month when actual production was 2,400 units and exceeded sales by 180 units,

Required:

i. The profit reported under Absorption costing and Marginal costing

ii. Reconcile profit under Absorption costing and Marginal costing