The following information relates to product XYZ$,$ for quarter $3,$ which has just ended:

Budget

Actual

Production $($units$)$

Sales $($units$)$

$40,000$

$38,000$

$46,000$

$42,000$

Fixed overheads $($N$\text{'}000)$

Variable overheads $($N$\text{'}000)$

$300$

$1,800$

$318$

$2,070$

The selling price of product Vee was N$72$ per unit

The fixed overheads were absorbed at a predetermined rate per unit.

At the beginning of quarter $3,$ there was an opening inventory of product Vee of $2,000$ units, valued at N$25$ per unit variable costs and N$5$ per unit fixed overheads.

 

 

Required:

a$.($i$)$ calculate the fixed overhead absorption rate per unit for the last quarter, and present profit statements using FIFO using

$($ii$)$ absorption costing,

$($ii$)$ marginal costing; and

$($iv$)$ reconcile and explain the difference between the profits or losses.

b$.$ Using the same data, present similar statements to those required in part $($a$).$ using the average cost method of valuation, reconcile the profit or loss figures, and comment briefly on the variations between the profits or losses in $($a$)$ and $($b$)$