- 20 Marks
MI – Nov 2014 – L1 – SB – Q2 – Costing Methods
This question requires preparing profit statements using the absorption costing approach.
Question
LADUGBO Limited, a company which manufactures and sells a single product named BETA, has the following data relating to the year 2015:
| Particulars | N |
|---|---|
| Selling Price | 45.00 |
| Direct Material Cost | 10.00 |
| Direct Wages Cost | 4.00 |
| Variable Overhead Cost | 2.50 |
The following forecasts of sales and production are expected during the first six months of 2015:
| Particulars | January-March | April-June |
|---|---|---|
| Sales (units) | 60,000 | 90,000 |
| Production (units) | 70,000 | 100,000 |
- Fixed production overhead costs are budgeted at N400,000 per annum. Normal production level is 320,000 units per annum.
- Variable selling and distribution cost is N1.50 per unit sold, while fixed administration cost is N240,000 per annum.
You are required to:
Prepare profit statements for each of the two quarters, in a columnar format, using the absorption costing approach. (20 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Absorption Costing, Fixed Overhead, Profit Statement, Variable Overhead
- Level: Level 1
- Topic: Costing Methods
- Series: NOV 2014
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