Question
The following data have been extracted from the budgets and standard costs of FAA Limited, a company which manufactures and sells a single product. GHS
The following data have been extracted from the budgets and standard costs of FAA Limited, a
company which manufactures and sells a single product.
GHS per unit
Selling price 65.00
Direct materials cost 15.00
Direct labour cost 6.00
Variable overhead cost 3.50
Fixed production overhead costs are budgeted at GHS250,000 per annum. Normal production levels are thought to be 200,000 units per annum.
Budgeted selling and distribution costs are as follows.
Variable GHS 2.50 per unit sold
Fixed GHS 45,000 per annum
Budgeted administration costs are GHS90,000 per annum.
The following trends of sales and production are expected during the year 2021.
1st Half-year 2nd Half-year
Sales (units) 80,000 100,000
Production (units) 90,000 120,000
There is no inventory on 1st January 2021.
Required:
Prepare profit statements for each half of the year 2021 using:
(a) Marginal costing
(b) Absorption costing
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