QUESTION TWoThe Shatontola Co. Ltd is a single-product manufacturing company, which uses a marginal costingsystem for internal management purposes. The year-end external reports are converted to absorptioncosts. Variances are charged to the cost of goods sold.The following data refers to the years ended 31 December 2020 and 2021:2020Sales price per unitStandard marginal cost per unit:Direct materialsDirect LabourMarginal factory overheadsMarginal selling and administrative expensesFixed factory overheadsK802119822021K902322103180,000Units170,000UnitsOpening inventory1,500Closing inventory2,000Sales20,000The normal volume used for the purpose of absorption costing is 28,000s units in both years.REQUIRED:(a) Prepare profit and loss accounts for the year-ended 31 December 2021 on a marginal costingand on an absorption costing basis.(b) Discuss any differences which you may find between these two profit and loss acconts.(c) State what advantages and disadvantages attach to the marginal costing approach for internalmanagement purposes.2,0001,50025,000

Name: QUESTION TWoThe Shatontola Co. Ltd is a single-product manufacturing
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Description: QUESTION TWoThe Shatontola Co. Ltd is a single-product manufacturing company, which uses a marginal costingsystem for internal management purposes. The year-end external reports are converted to absorptioncosts. Variances are charged to the cost of

Marginal costing is one of the branches of costing. It refers to ascertaining the marginal cost and…

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QUESTION TWO The Shatontola Co. Ltd is a single-product manufacturing company, which uses a marginal costing system for internal management purposes. The year-end external reports are converted to absorption costs. Variances are charged to the cost of goods sold. The following data refers to the years ended 31 December 2020 and 2021: 2020 Sales price per unit Standard marginal cost per unit: Direct materials Direct Labour Marginal factory overheads Marginal selling and administrative expenses Fixed factory overheads K 80 21 19 00 8 2 170,000 Units 2021 K 90 23 22 10 3 180,000 Units 2,000 Opening inventory 1,500 Closing inventory 2,000 Sales 20,000 The normal volume used for the purpose of absorption costing is 28,000s units in both years. REQUIRED: (a) Prepare profit and loss accounts for the year-ended 31 December 2021 on a marginal costing and on an absorption costing basis. (b) Discuss any differences which you may find between these two profit and loss acconts. (c) State what advantages and disadvantages attach to the marginal costing approach for internal management purposes. 1,500 25,000

QUESTION TWO The Shatontola Co. Ltd is a single-product manufacturing company, which uses a marginal costing system for internal management purposes. The year-end external reports are converted to absorption costs. Variances are charged to the cost of goods sold. The following data refers to the years ended 31 December 2020 and 2021: 2020 Sales price per unit Standard marginal cost per unit: Direct materials Direct Labour Marginal factory overheads Marginal selling and administrative expenses Fixed factory overheads K 80 21 19 00 8 2 170,000 Units 2021 K 90 23 22 10 3 180,000 Units 2,000 Opening inventory 1,500 Closing inventory 2,000 Sales 20,000 The normal volume used for the purpose of absorption costing is 28,000s units in both years. REQUIRED: (a) Prepare profit and loss accounts for the year-ended 31 December 2021 on a marginal costing and on an absorption costing basis. (b) Discuss any differences which you may find between these two profit and loss acconts. (c) State what advantages and disadvantages attach to the marginal costing approach for internal management purposes. 1,500 25,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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