hanell Industrial Limited makes and sells one product, which has the following standard variable production costs per unit. Rs. Direct materials cost (2 kg at Rs.25 per kg) 50 Direct labour cost (3 hours at Rs.40 per hour) 120 Variable production overhead costs (Rs.10 per labour hour) 30 The budgeted selling price per unit is Rs.400 for the coming two years. The production and sales budgets for the next two years are as follows: 2019 2020 Production in units 50,000 60,000 Sales in units 40,000 70,000 There is no opening inventory at the beginning of 2019. Budgeted and actual costs are as follows. Fixed production overhead costs Rs.1,080,000 Fixed non-production overhead costs per annum Rs.2,000,000 Variable non-production overhead costs Rs.10 per unit sold Fixed production overhead costs are absorbed based on a normal production level of 54,000 units per annum. Prepare the income statements for 2020 under marginal costing and absorption costing. 2. Explain the difference between the profits under two approaches. Calculations are required to support your explanation.
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.
Shanell Industrial Limited makes and sells one product, which has the following standard variable production costs per unit.
Rs.
Direct materials cost (2 kg at Rs.25 per kg) 50
Direct labour cost (3 hours at Rs.40 per hour) 120
Variable production
The budgeted selling price per unit is Rs.400 for the coming two years. The production
and sales budgets for the next two years are as follows:
2019 2020
Production in units 50,000 60,000
Sales in units 40,000 70,000
There is no opening inventory at the beginning of 2019. Budgeted and actual costs are as follows.
Fixed production overhead costs Rs.1,080,000
Fixed non-production overhead costs per annum Rs.2,000,000
Variable non-production overhead costs Rs.10 per unit sold
Fixed production overhead costs are absorbed based on a normal production level of 54,000 units per annum.
- Prepare the income statements for 2020 under marginal costing and absorption costing.
2. Explain the difference between the profits under two approaches. Calculations are required to support your explanation.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
