The following data have been extracted from the budgets and standard costs of FAA Limited, a company which manufactures and sells a single product. GHS per unit Selling price 65.00 Direct materials cost 15.00 Direct labour cost 6.00 Variable overhead cost 3.50 Fixed production overhead costs are budgeted at GHS500,000 per annum. Normal production levels are thought to be 400,000 units per annum. Budgeted selling and distribution costs are as follows. Variable GHS 2.50 per unit sold Fixeed GHS 90,000 per annum Budgeted administration costs are GHS180,000 per annum. The following trends of sales and production are expected during the first six months of 2020. 1st Quarter 2nd Quarter Sales (units) 80,000 100,000 Production (units) 90,000 120,000 There is no inventory on 1st January 2020. Required Prepare profit statements for each of the two quarters using: (a) Marginal costing (b) Absorption costing
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.
The following data have been extracted from the budgets and
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GHS per unit |
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Selling price |
65.00 |
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Direct materials cost |
15.00 |
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Direct labour cost |
6.00 |
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Variable overhead cost |
3.50 |
Fixed production overhead costs are budgeted at GHS500,000 per annum. Normal production levels are thought to be 400,000 units per annum.
Budgeted selling and distribution costs are as follows.
|
Variable |
GHS 2.50 per unit sold |
|
Fixeed |
GHS 90,000 per annum |
Budgeted administration costs are GHS180,000 per annum.
The following trends of sales and production are expected during the first six months of 2020.
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|
1st Quarter |
2nd Quarter |
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|
|
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Sales (units) |
80,000 |
100,000 |
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Production (units)
|
90,000
|
120,000 |
|
There is no inventory on 1st January 2020.
Required
Prepare profit statements for each of the two quarters using:
(a) Marginal costing
(b) Absorption costing
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