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  3. 4. x limited commenced business on april 1 making

4. X limited commenced business on April 1 making one product only, the standard cost...

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Accounting

4. X limited commenced business on April 1 making one product only, the standard cost of which is as follows:

Standard Cost Card

Direct Labour

5

Direct Material

8

Variable Production overheads

2

Fixed Production Overhead

5

Standard Production Cost

20

1. The fixed production overhead figure has been calculated on the basis of a budgeted normal output of 36,000 units per annum.
2. You are to assume that there were no expenditure or efficiency variances and that all the budgeted fixed expenses are incurred over the year. March and April are to be taken as equal period month.

1. Selling, administration and distribution expenses are:

Fixed

GHC 120,000

Variable

15% of sales value

The selling price per unit is 35 and the numbers of units produced and sold were:

Months

March

April

Production

2000

3,200

Sales

1,500

3,000

Required

a) Prepare an operating statement for each month of March and April using marginal and absorption costing
b) Present a reconciliation of the profit or loss figures obtain in your answer in (a) above
c) Comment briefly on which costing principle (marginal or absorption) should be used for what purpose

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