Mable PLC has the following data for November and December 2007. Basic production standard cost and selling price per unit of product is: K Direct Material 13 Direct Labour 15 Variable overhead 2 Fixed overhead (based on K1,500,000 and 150,000 units of normal activity) 10 Total standard cost 40 Unit selling price K50 Other expenses: Fixed selling and administration overhead: K650,000 Sales commission: 5% of sales value Output and sales in units November December Opening inventory Nil 30,000 Production 170,000 140,000 Sales 140,000 160,000 Closing inventory 30,000 10,000 Actual fixed production overheads for each month were the same as the budgeted amount. Required Prepare a profit statement for each of the two months of November and December 2007 using: Total absorption costing and Marginal costing Prepare a reconciliation of the differences in net profit reported under the two systems for each of the two months.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Mable PLC has the following data for November and December 2007.
Basic production
K
Direct Material 13
Direct Labour 15
Variable overhead 2
Fixed overhead (based on K1,500,000 and 150,000 units of normal activity) 10
Total standard cost 40
Unit selling price K50
Other expenses:
Fixed selling and administration overhead: K650,000
Sales commission: 5% of sales value
Output and sales in units
November December
Opening inventory Nil 30,000
Production 170,000 140,000
Sales 140,000 160,000
Closing inventory 30,000 10,000
Actual fixed production
Required
- Prepare a profit statement for each of the two months of November and December 2007 using: Total absorption costing and Marginal costing
- Prepare a reconciliation of the differences in net profit reported under the two systems for each of the two months.
Step by step
Solved in 2 steps with 7 images
