The Valley Fireworks Limited (“Valley") manufactures special firework display kits to sell to responsible organisations only. The following information is taken from its budget for 2021: Selling price Direct materials $ per unit S per annum 500 60 Direct labour 180 10 20 Variable production overhead Variable distribution overhead Fixed production overhead Fixed administrative overhead 96,000 144,000 The budget is assumed that opening and closing inventory are 20 kits and annual production equals to annual sales which are 1,200 kits. Its financial ended is on 31 December.
The Valley Fireworks Limited (“Valley") manufactures special firework display kits to sell to responsible organisations only. The following information is taken from its budget for 2021: Selling price Direct materials $ per unit S per annum 500 60 Direct labour 180 10 20 Variable production overhead Variable distribution overhead Fixed production overhead Fixed administrative overhead 96,000 144,000 The budget is assumed that opening and closing inventory are 20 kits and annual production equals to annual sales which are 1,200 kits. Its financial ended is on 31 December.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
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Problem 9E: Nozama.com Inc. sells consumer electronics over the Internet. For the next period, the budgeted cost...
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![The Valley Fireworks Limited (“Valley") manufactures special firework display kits to sell to
responsible organisations only. The following information is taken from its budget for 2021:
$ per unit S per annum
500
Selling price
Direct materials
60
Direct labour
180
Variable production overhead
Variable distribution overhead
10
20
Fixed production overhead
Fixed administrative overhead
96,000
144,000
The budget is assumed that opening and closing inventory are 20 kits and annual production
equals to annual sales which are 1,200 kits. Its financial ended is on 31 December.
The actual production and sales volumes for 2021 were:
Units
Q1
Q2
290
Q3
550
Q4
690
Opening inventory
10
300
980
Production
300
300
200
Sales
20
40
60
Closing inventory
290
550
690
10
The variable costs per kit and the total fixed costs were as budget.
Required:
a. Prepare income statement of The Valley for each of the four quarters and the year of 2021
under the absorption costing method.
b. Prepare income statement of The Valley for each of the four quarters and the year of 2021
under the variable costing method.
c. Reconcile The Valley's operating income reported under absorption and variable costing
for each quarter and the year of 2021.
(39 marks)
(21 marks)
(10 marks)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb87ace57-0ed3-4566-be70-f7146df6b98d%2Fb6e31d30-e16c-430b-bffb-2bad8508cb3d%2Fjbfqu9b_processed.png&w=3840&q=75)
Transcribed Image Text:The Valley Fireworks Limited (“Valley") manufactures special firework display kits to sell to
responsible organisations only. The following information is taken from its budget for 2021:
$ per unit S per annum
500
Selling price
Direct materials
60
Direct labour
180
Variable production overhead
Variable distribution overhead
10
20
Fixed production overhead
Fixed administrative overhead
96,000
144,000
The budget is assumed that opening and closing inventory are 20 kits and annual production
equals to annual sales which are 1,200 kits. Its financial ended is on 31 December.
The actual production and sales volumes for 2021 were:
Units
Q1
Q2
290
Q3
550
Q4
690
Opening inventory
10
300
980
Production
300
300
200
Sales
20
40
60
Closing inventory
290
550
690
10
The variable costs per kit and the total fixed costs were as budget.
Required:
a. Prepare income statement of The Valley for each of the four quarters and the year of 2021
under the absorption costing method.
b. Prepare income statement of The Valley for each of the four quarters and the year of 2021
under the variable costing method.
c. Reconcile The Valley's operating income reported under absorption and variable costing
for each quarter and the year of 2021.
(39 marks)
(21 marks)
(10 marks)
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