Alexander Gentles Ltd manufactures a single product. For the month of November 2016, the company sold 6,000 units of the product at $500 each. At the start of November there were 460 units in store, while on November 30, 2016 inventory on hand was counted to be 630 units. The company has a budgeted capacity of 6,800 units. The following table shows cost information for the product that was extracted from the company’s accounting records. Cost per unitDetails$Direct materials90Direct labour80Production overheads60 230 Administrative and selling overheads for November 2016 were budgeted at $350,000 and 280,000 respectively. The company’s records also revealed that sixty percent (60%) of the production overheads were fixed. Required: Calculate profit for November 2016 using absorption costing techniques. Give two (2) reasons for the difference in profit shown by the above methods. Reconcile the above profit numbers for management.

The question is based on the concept of Cost Accounting.

Answered: Alexander Gentles Ltd manufactures a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Alexander Gentles Ltd manufactures a single product. For the month of November 2016, the company sold 6,000 units of the product at $500 each. At the start of November there were 460 units in store, while on November 30, 2016 inventory on hand was counted to be 630 units. The company has a budgeted capacity of 6,800 units. The following table shows cost information for the product that was extracted from the company’s accounting records.

Cost per unit

Details	$
Direct materials	90
Direct labour	80
Production overheads	60
	230

Administrative and selling overheads for November 2016 were budgeted at $350,000 and 280,000 respectively. The company’s records also revealed that sixty percent (60%) of the production overheads were fixed.

Required:

Calculate profit for November 2016 using absorption costing techniques.
Give two (2) reasons for the difference in profit shown by the above methods.
Reconcile the above profit numbers for management.

Expert Solution

Step by step

Solved in 4 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Financial Reporting in Hyperinflationary Economies

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions