Week 11 Absorption Costing & Marginal Costing Profit Statement Answer all questions Fantasia Berhad plans to manufacture a new product next month. The expected average monthly sales and production volumes are 3,000 units. Budgeted cost per unit of a product based on the average monthly production volume is as follows: Direct material Direct labour (RM16 per hour) Variable production overhead Other information are as follows: Selling Price per unit Variable selling and administration overhead Fixed selling and administration overhead Fixed production overhead Additional information: RM 110 48 Required: a. 24 182 i. Fixed selling and administration overhead is to be treated as period cost in the monthly Income Statement. RM400 10% of selling price RM168,000 per month RM126,000 per month The budgeted production for the first month is 3,720 units but only 2,680 units are expected to be sold. Prepare the Statement of Profit or Loss of Fantasia Berhad for the first month using the Marginal Costing Approach and Absorption Costing Approach. Prepare a Profit Reconciliation Statement to show the differences in the profits under both costing approaches.
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.
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