Coffee works Limited manufactures coffee machines for domestic use. The management of the company is considering next year’s production and has asked you to help with certain financial decisions. The following information is available: Selling price (per machine) £80 Direct materials (per machine) £25 Direct labour (per machine) £20 Fixed production overheads £270,000 per year. The company is planning to manufacture 15,000 coffee machines next year. (a) calculate the marginal cost per coffee machine (b) calculate the absorption cost per coffee machine (c) prepare a statement of profit or loss (under marginal and absorption costing method) to show the profit or loss if 15,000 coffee machines are sold
Coffee works Limited manufactures coffee machines for domestic use. The management of the company is considering next year’s production and has asked you to help with certain financial decisions. The following information is available: Selling price (per machine) £80 Direct materials (per machine) £25 Direct labour (per machine) £20 Fixed production overheads £270,000 per year. The company is planning to manufacture 15,000 coffee machines next year. (a) calculate the marginal cost per coffee machine (b) calculate the absorption cost per coffee machine (c) prepare a statement of profit or loss (under marginal and absorption costing method) to show the profit or loss if 15,000 coffee machines are sold
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Coffee works Limited manufactures coffee machines for domestic use. The management of the company is considering next year’s production and has asked you to help with certain financial decisions. The following information is available:
Selling price (per machine) £80
Direct materials (per machine) £25
Direct labour (per machine) £20
Fixed production
The company is planning to manufacture 15,000 coffee machines next year.
(a) calculate the marginal cost per coffee machine
(b) calculate the absorption cost per coffee machine
(c) prepare a statement of profit or loss (under marginal and absorption costing method) to show the profit or loss if 15,000 coffee machines are sold
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 2 images
Knowledge Booster
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.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education