Dan Wood Ltd commenced business on 1st January 2020 making one product only, which sells for K160 per item. The production and sales data for each of the first three months of 2020 was as follows: January February March Sales in units 2,400 2,500 3,800 Production in units 2,700 2,400 4,000 Actual information for each month was as follows: Direct materials 3 kilograms at K5 per kilogram Direct labour 4 hours at K10 per hour Variable production overheads 150% of direct labour Sales commission 10% of sales value Fixed production overheads K10,000 Fixed selling overheads K35,000 There was no opening inventory at the start of January. Fixed production overheads are budgeted at K120,000 per annum and are absorbed into products based on a budgeted normal output of 30,000 units per annum Required: Prepare a profit statement for each of the three months using absorption costing principlesDan Wood Ltd commenced business on 1st January 2020 making one product only, which sells for K160 per item. The production and sales data for each of the first three months of 2020 was as follows:
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Dan Wood Ltd commenced business on 1st January 2020 making one product only, which sells for K160 per item. The production and sales data for each of the first three months of 2020 was as follows:
January
February
March
Sales in units
2,400
2,500
3,800
Production in units
2,700
2,400
4,000
Actual information for each month was as follows:
Direct materials 3 kilograms at K5 per kilogram
Direct labour 4 hours at K10 per hour
Variable production
Sales commission 10% of sales value
Fixed production overheads K10,000
Fixed selling overheads K35,000
There was no opening inventory at the start of January. Fixed production overheads are budgeted at K120,000 per annum and are absorbed into products based on a budgeted normal output of 30,000 units per annum
Required:
Prepare a profit statement for each of the three months using absorption costing principlesDan Wood Ltd commenced business on 1st January 2020 making one product only, which sells for K160 per item. The production and sales data for each of the first three months of 2020 was as follows:
January
February
March
Sales in units
2,400
2,500
3,800
Production in units
2,700
2,400
4,000
Actual information for each month was as follows:
Direct materials 3 kilograms at K5 per kilogram
Direct labour 4 hours at K10 per hour
Variable production overheads 150% of direct labour
Sales commission 10% of sales value
Fixed production overheads K10,000
Fixed selling overheads K35,000
There was no opening inventory at the start of January. Fixed production overheads are budgeted at K120,000 per annum and are absorbed into products based on a budgeted normal output of 30,000 units per annum
Required:
Prepare a profit statement for each of the three months using absorption costing principles
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