X pic produces one product - desks.

Each desk is budgeted to require 4 kg of wood at $3 per kg, 4 hours of labour at $2 per hour, and variable

production overheads of $5 per unit.

Fixed production overheads are budgeted at $20,000 per month and average production is estimated to be

10,000 units per month.

The selling price is fixed at $35 per unit.

There is also a variable selling cost of $1 per unit and fixed selling cost of $2,000 per month.

During the first two months X plc expects the following levels of activity:

January

February

Production

11,000 units

9,500 units

Sales

9,000 units

11,500 units

(a)

Prepare a cost card using absorption costing

(b)

Set out budget Profit Statements for the months of January and February.