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Question #1-CLO 3 (40 marks)

Keitrikim Ltd makes and sells two products, Scrunchi and Bandana. The following information relating to the product was also extracted from the financial records:

	Scrunchi	Bandana
Production (units)	1,200	3,640
Sales (units)	800	2,300
Opening stock (units)	5,375	1,540
Budgeted capacity (units)	6,080	4,500
Financial Data:
	$	$
Unit selling price	1200	900
Unit cost:
Direct materials	10	25
Direct labour	12	14
Variable production overheads	23	9
	45	48
Fixed production overheads	20	15

Fixed administration overheads were $580,000 and Fixed selling overheads were $90,000.

As the Cost Accountant you have been asked to do the following:

Determine the amount of stock left in store. (4 marks)

Calculate the full cost per unit of production. (4 marks)

Prepare an income statement based on marginal costing principles. (12 marks)

Prepare an income statement based on absorption costing principles. (14 marks)

Management is planning on launching a marketing campaign to increase the sale of Srunchi. They believe that the higher selling price of Srunchi means that it will generate more revenue and profit than Bandana. Advise management on the product they should focus on increasing sales for by preparing a reconciliation of the profits. (6 marks)

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