Man City Enterprises commenced operations on 1 January 2022, and produces a single product that sells for R36 per unit. During 2022, 300 000 units of the product were manufactured of which 240 000 units were sold. There was no work-inprocess inventory at the end of the year. All costs are presented in the table below: Cost type Fixed Variable Direct materials - R6.00 per unit produced Direct labour - R4.00 per unit produced Factory overhead R600 000 R2.00 per unit produced Marketing and administrative R300 000 R1.00 per unit sold Required: Prepare the income statement using the Marginal Costing method for the year ended 31 December 2022.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Man City Enterprises commenced operations on 1 January 2022, and produces a single product that sells
for R36 per unit. During 2022, 300 000 units of the product were manufactured of which 240 000 units
were sold. There was no work-inprocess inventory at the end of the year. All costs are presented in the
table below:
Cost type Fixed Variable
Direct materials - R6.00 per unit produced
Direct labour - R4.00 per unit produced
Factory
Marketing and administrative R300 000 R1.00 per unit sold
Required:
Prepare the income statement using the Marginal Costing method for the year ended 31 December 2022.
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