The following information relates to the only product made by Fabby Limited for the year ended 31 December 2021: Opening Inventory Number of units manufactured 99 000 Number of units sold (at R5 940 per unit) 98 000 Direct Materials costs per unit R990 Direct Labour costs per unit R1980 Variable manufacturing overheads cost per unit R980 Variable selling expenses per unit R220 Fixed Manufacturing overhead cost R4 950 000 Fixed selling and administrative expenses R1 980 000
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.
REQUIRED:
Draft the income statement for the year ended 31 December 2021 using the:
5.1 Marginal Costing method
5.2 Absorption Costing method
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