2.1 REQUIRED Use the information given below to prepare the Income Statement of Costa Enterprises for the year ended 31 December 2022 using the absorption costing method. INFORMATION Costa Enterprises commenced operations on 02 January 2022, and produces a single product that sells for R72 per unit. During 2022, 300 000 units of the product were manufactured of which 240 000 units were sold. There was no work-in-process inventory at the end of the year. Manufacturing costs and marketing and administrative costs for 2022 were as follows: Costs/Expenses Direct materials Direct labour Manufacturing overheads cost Marketing and administrative cost Fixed R1 200 000 R600 000 Variable R12 per unit produced R8 per unit produced R4 per unit produced R2 per unit sold

2.1 REQUIRED Use the information given below to prepare the Income Statement of Costa Enterprises for the year ended 31 December 2022 using the absorption costing method. INFORMATION Costa Enterprises commenced operations on 02 January 2022, and produces a single product that sells for R72 per unit. During 2022, 300 000 units of the product were manufactured of which 240 000 units were sold. There was no work-in-process inventory at the end of the year. Manufacturing costs and marketing and administrative costs for 2022 were as follows: Costs/Expenses Direct materials Direct labour Manufacturing overheads cost Marketing and administrative cost Fixed R1 200 000 R600 000 Variable R12 per unit produced R8 per unit produced R4 per unit produced R2 per unit sold

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

2.1
REQUIRED
Use the information given below to prepare the Income Statement of Costa Enterprises for the year ended 31
December 2022 using the absorption costing method.
INFORMATION
Costa Enterprises commenced operations on 02 January 2022, and produces a single product that sells for R72
per unit. During 2022, 300 000 units of the product were manufactured of which 240 000 units were sold. There
was no work-in-process inventory at the end of the year. Manufacturing costs and marketing and administrative
costs for 2022 were as follows:
Costs/Expenses
Direct materials
Direct labour
Manufacturing overheads cost
Marketing and administrative cost
Fixed
R1 200 000
R600 000
Variable
R12 per unit produced
R8 per unit produced
R4 per unit produced
R2 per unit sold

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Step 1: Introduction

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Step 2: Fixed Manufacturing OH Absorption Rate

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Step 3: Cost of Goods Sold Under Absorption Costing

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Step 4: Marketing & Administrative Cost

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Step 5: Total Sales Revenue

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