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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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

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