- 20 Marks
IMAC – NOV 2023 – L1 – Q1 – Marginal Costing and Absorption Costing
Prepare profit statements for January and February 2023 using marginal costing and absorption costing methods.
Question
Alokome Plc is a company that produces and sells one product “Iga”. Information relating to the operations of Alokome Plc for the first two months of 2023 is as follows:
i) Iga sells for GH₵500 per unit.
ii) There were no inventories of Iga at the end of December 2022.
iii) Other relevant information is as follows:
| Cost Element | GH₵ |
|---|---|
| Direct material and wages | 220 |
| Variable production overhead | 30 |
Budgeted and actual costs per month:
| Cost Element | GH₵ |
|---|---|
| Fixed production overhead | 990,000 |
| Fixed selling and administrative expenses | 400,000 |
| Variable selling expenses | 12.5% of sales |
Normal capacity: 110,000 units per month
Number of units produced and sold:
| Month | Sales (units) | Production (units) |
|---|---|---|
| January | 128,000 | 140,000 |
| February | 110,000 | 102,000 |
Required:
Using the information above, prepare in a columnar form profit statements for January and February 2023 using:
a) Marginal costing (10 marks)
b) Absorption costing (10 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Absorption Costing, Marginal Costing, Over/Under Absorption, Profit Statement
- Level: Level 1
- Topic: Marginal Costing and Absorption Costing
- Series: NOV 2023
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