subject; accounting

QUESTION 4 [25 MARKS] The following budgeted profit statement has been prepared using absorption costing principles.

The members of the management team are concerned by the significant change in profitability between the two six-months periods. As a management accountant, you have analysed the data upon which the above budget statement has been produced, with the following results.

The production overhead cost comprises both a fixed and a variable element. The latter appears to be dependent on the number of units produced. The fixed element of the cost is expected to be incurred at a constant rate throughout the year. The selling costs are fixed. The distribution cost comprises both fixed and variable elements. The latter appears to be dependent on the number of units sold. The fixed element of the sot is expected to be incurred at a constant rate throughout the year. The administration costs are fixed. Required: Present the above budgeted profit statement in marginal costing format. (25 marks)

January to June 2017 BWP'000 BWP'000 540 100 July to December 2017 BWP'000 BWP'000 360 160 Sales Opening inventory Production costs: Direct materials Direct labour Overhead los 162 90 460 160 36 54 30 280 80 Closing Inventory 300 240 200 160 Gross pront Production overhead (over under absorption Selling costs Distribution costs Administration costs (12) 50 45 80 12 50 40 80 Net profit 163 WZ 182 22 Sales units Production units 15,000 18.000 10.000 6,000 Downloading. Check notification for progress. Cancel January to June 2017 BWP'000 BWP'000 540 100 July to December 2017 BWP'000 BWP'000 360 160 Sales Opening inventory Production costs: Direct materials Direct labour Overhead los 162 90 460 160 36 54 30 280 80 Closing Inventory 300 240 200 160 Gross pront Production overhead (over under absorption Selling costs Distribution costs Administration costs (12) 50 45 80 12 50 40 80 Net profit 163 WZ 182 22 Sales units Production units 15,000 18.000 10.000 6,000 Downloading. Check notification for progress. Cancel