Hightech Sdn Bhd (HSB) produces knee guards for recreational activity, which are marketed throughout Malaysia. Selected cost and operating data relating to the product for two years are given below: Year 2020 Year 2021 Units in beginning inventory 0 ? Units produced during the year 18,000 10,800 Units sold during the year 14,400 14,400 Units in ending inventory 3,600 0 RM Selling price per unit 54 Manufacturing costs: Variable per unit produced: Direct materials 11 Direct labour 6 Variable overhead 5 Fixed per year 162,000 Selling and administrative costs: Variable per unit sold 4 Fixed per year 78,000 Additional information: Net operating incomes under variable costing system are RM163,200 for the year 2020 and 2021. REQUIRED: (a) Calculate unit product cost under absorption costing system for the year 2020 and 2021. (b) Prepare an income statement using absorption costing system for the year ended 31 December 2020 and 2021. (c) Reconcile the variable costing and absorption costing net operating incomes for both years. (d) Explain how managers manipulate income with the use of absorption costing system.
Hightech Sdn Bhd (HSB) produces knee guards for recreational activity, which are marketed throughout Malaysia. Selected cost and operating data relating to the product for two years are given below:
|
Year 2020 |
Year 2021 |
|
Units in beginning inventory 0 |
? |
|
Units produced during the year 18,000 |
10,800 |
|
Units sold during the year 14,400 |
14,400 |
|
Units in ending inventory 3,600
|
0 |
|
|
RM |
|
Selling price per unit |
54 |
|
|
|
|
Variable per unit produced: |
|
|
Direct materials |
11 |
|
Direct labour |
6 |
|
Variable |
5 |
|
Fixed per year |
162,000 |
Selling and administrative costs:
Variable per unit sold 4
Fixed per year 78,000
Additional information:
- Net operating incomes under variable costing system are RM163,200 for the year 2020 and 2021.
REQUIRED:
(a) Calculate unit product cost under absorption costing system for the year 2020 and 2021.
(b) Prepare an income statement using absorption costing system for the year ended 31 December 2020 and 2021.
(c) Reconcile the variable costing and absorption costing net operating incomes for both years.
(d) Explain how managers manipulate income with the use of absorption costing system.
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