The following information pertains to a year’s operation of Linda & Co: Units produced 3,500 Units sold 3,100 Direct labour RM4,000 Direct materials used RM3,000 Selling and administrative expenses (all fixed) RM 900 Fixed manufacturing overhead RM5,000 Variable manufacturing overhead RM2,500 All beginning inventories RM 0 Gross profit RM2,200 Direct materials ending inventory RM 400 Work-in-process ending inventory RM 0 1) What is the cost of finished goods ending inventory under the marginal costing system? 2) What is the cost of finished goods ending inventory under the traditional absorption costing system? 3) The cost of finished goods ending inventory makes up ___% of total production cost, under both systems?
The following information pertains to a year’s operation of Linda & Co:
Units produced 3,500
Units sold 3,100
Direct labour RM4,000
Direct materials used RM3,000
Selling and administrative expenses (all fixed) RM 900
Fixed manufacturing
Variable manufacturing overhead RM2,500
All beginning inventories RM 0
Gross profit RM2,200
Direct materials ending inventory RM 400
Work-in-process ending inventory RM 0
1) What is the cost of finished goods ending inventory under the marginal costing system?
2) What is the cost of finished goods ending inventory under the traditional absorption costing system?
3) The cost of finished goods ending inventory makes up ___% of total production cost, under both systems?
4) Would operating income be higher or lower under the marginal costing system? By how much?
5) When would the traditional system show higher profit and why?
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