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Smith Sisters Ltd manufactures secateurs for local DIY stores. The following information relates to their first three years: Year 1 Units Year 2 Year 3
Smith Sisters Ltd manufactures secateurs for local DIY stores. The following information relates to their first three years: Year 1 Units Year 2 Year 3 Units Units Production Sales Fixed costs Production 12,000 10,000 12,500 8,000 10,000 12,000 30,000 Selling & distribution 25,000 32,000 27,500 33,000 29,000 Years 1 & 2 Year 3 Selling price per unit 20 per unit 20 Direct materials 8 9 Direct labour 3 3 Other variable costs 1 1 Total variable cost 12 13 Required: (a) (i) Calculate earnings for ALL three years using absorption costing (ii) marginal costing (b) Explain the rationale for different profit figures under the two costing methods (c) Which method of profit measurement is preferable
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