A company produces and sells a single product, the standard unit cost details of which are as follows: Direct material: 2 kilos at N$4.5 per kilo Direct labour: 3 hours at N$5 per hour Variable overhead: 3 hours at N$3 per hour The total overhead is budgeted at N$90 000 per month and is absorbed on a rate per unit basis. The budgeted output per month is 15 000 units The product has a standard selling price of N$50 per unit The following activity took place during January and February January February sales 14 000 units 16 000 units production 16 000 units 14 500 units There is an opening stock on 1 January of 3000 units Required: (a) Calculate the standard cost and profit for one unit of output (b) Prepare profit statements for each month using (i) Marginal costing (ii) Absorption costing
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
A company produces and sells a single product, the standard unit cost details of which are as follows:
Direct material: 2 kilos at N$4.5 per kilo
Direct labour: 3 hours at N$5 per hour
Variable
The total overhead is budgeted at N$90 000 per month and is absorbed on a rate per unit basis.
The budgeted output per month is 15 000 units
The product has a standard selling price of N$50 per unit
The following activity took place during January and February
| January | February | |
| sales | 14 000 units | 16 000 units |
| production | 16 000 units | 14 500 units |
There is an opening stock on 1 January of 3000 units
Required:
(a) Calculate the
(b) Prepare profit statements for each month using
(i) Marginal costing
(ii) Absorption costing
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