The finance director (FD) has been tasked by the board to calculate the profit of changin costing system from variable to absorption costing. The FD has requested you g necessary information and provide the relevant calculations. You obtained the following information: 2.1 2.2 2.3 2.4 Detail Units produced/manufactured during the period Units sold during the period Variable cost per unit Selling price per unit Total fixed costs for the period (NB: Includes R960,000 fixed manufacturing costs) Compare the profitability of the two costing systems. Explain the difference in profitability in the previous question 32,000 27,000 R100 R250 R1,500,000 Which costing system would you recommend and why? would happen to profit figures in period 2 if 27,000 units are manufactured and 32,000 units are sold, considering 5,000 units of initial inventory from period 1
The finance director (FD) has been tasked by the board to calculate the profit of changin costing system from variable to absorption costing. The FD has requested you g necessary information and provide the relevant calculations. You obtained the following information: 2.1 2.2 2.3 2.4 Detail Units produced/manufactured during the period Units sold during the period Variable cost per unit Selling price per unit Total fixed costs for the period (NB: Includes R960,000 fixed manufacturing costs) Compare the profitability of the two costing systems. Explain the difference in profitability in the previous question 32,000 27,000 R100 R250 R1,500,000 Which costing system would you recommend and why? would happen to profit figures in period 2 if 27,000 units are manufactured and 32,000 units are sold, considering 5,000 units of initial inventory from period 1
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Transcribed Image Text:QUESTION 2
The finance director (FD) has been tasked by the board to calculate the profit of changing
costing system from variable to absorption costing. The FD has requested you ga
necessary information and provide the relevant calculations.
You obtained the following information:
2.1
2.2
2.3
2.4
Detail
Units produced/manufactured during the period
Units sold during the period
Variable cost per unit
Selling price per unit
Total fixed costs for the period (NB: Includes
R960,000 fixed manufacturing costs)
Compare the profitability of the two costing systems.
32,000
27,000
R100
R250
R1,500,000
Explain the difference in profitability in the previous question
would happen to profit figures in period 2 if 27,000 units are manufactured
period 1
and 32,000 units are sold, considering 5,000 units of initial inventory from
Which costing system would you recommend and why?
[
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