Task 2 Stone Absorption costing (over- and under absorbtion) Marginal costing Stine is drafting a budget on the absis of the following data: Direct material Direct labour Variable production expenses Fixed production overheads are budgeted at Normal output The selling price is fixed at Information about production and sales Production Sales January units 7 500 5 000 10 $ per unit 5 $ per unit 8 $ per unit. i) absorption costing ii) marginal costing c) Compare Net profit and make a conclusion 27 000 9 000 30 $ per unit. February units 8500 8 500 $ per month and units per month; March units 9 000 9 500 (a)Prepare a cost card using absorption and marginal costing (b)Set out Income Statements for the months of January and February, using 90 % capacity.
Task 2 Stone Absorption costing (over- and under absorbtion) Marginal costing Stine is drafting a budget on the absis of the following data: Direct material Direct labour Variable production expenses Fixed production overheads are budgeted at Normal output The selling price is fixed at Information about production and sales Production Sales January units 7 500 5 000 10 $ per unit 5 $ per unit 8 $ per unit. i) absorption costing ii) marginal costing c) Compare Net profit and make a conclusion 27 000 9 000 30 $ per unit. February units 8500 8 500 $ per month and units per month; March units 9 000 9 500 (a)Prepare a cost card using absorption and marginal costing (b)Set out Income Statements for the months of January and February, using 90 % capacity.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
Question
Transcribed Image Text:### Task 2: Stone - Absorption Costing (Over- and Under Absorption) and Marginal Costing
Stine is drafting a budget on the basis of the following data:
- **Direct Material:** $10 per unit
- **Direct Labour:** $5 per unit
- **Variable Production Expenses:** $8 per unit
**Fixed production overheads are budgeted at:**
- $27,000 per month
- Normal output: 9,000 units per month; 90% capacity.
**The selling price is fixed at:**
- $30 per unit.
**Information about production and sales:**
| | January | February | March |
|-----------------|---------|----------|-------|
| **Production (units)** | 7,500 | 8,500 | 9,000 |
| **Sales (units)** | 5,000 | 8,500 | 9,500 |
**Tasks:**
(a) Prepare a cost card using absorption and marginal costing.
(b) Set out Income Statements for the months of January and February, using:
- i) Absorption costing
- ii) Marginal costing
(c) Compare Net profit and make a conclusion.
### Explanation of Potential Graphs/Diagrams
In this section, diagrams and graphs might be used to complement the textual explanation. Here are potential visual aids that could be provided:
1. **Cost Card Diagram:**
- A detailed breakdown of costs per unit under both absorption and marginal costing methods. This could show each cost component (direct material, direct labor, variable production expenses, and fixed overheads).
2. **Income Statements:**
- Income statement layouts for January and February using both absorption and marginal costing. This would highlight the differences in the treatment of fixed production overheads between the two costing methods.
3. **Net Profit Comparison Chart:**
- A bar chart or table comparing the net profit under both costing methods for January and February, so as to make the profit impact clear and visual.
These tools help enhance understanding by providing a clear visual representation of financial data and thereby aiding in comparing the results from the different costing methods.
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