Question

$2$

$($

$3$

$2$

$$marks

$)$

$$

Enes Inc. is the main manufacturer of multicolour headbands in Western Jamaica. The following budgeted data relates to Enes Inc. for two periods: December

$3$

$1$

$,$

$2$

$0$

$2$

$2$

$$and December

$3$

$1$

$,$

$2$

$0$

$2$

$3$

$.$

$$

$$

$$ Dec.

$2$

$0$

$2$

$2$

$$ Dec.

$2$

$0$

$2$

$3$

$$

Production

$($

units

$)$

$5$

$4$

$,$

$0$

$0$

$0$

$6$

$7$

$,$

$0$

$0$

$0$

$$

Sales

$($

units

$)$

$6$

$2$

$,$

$0$

$0$

$0$

$7$

$3$

$,$

$0$

$0$

$0$

$$

Opening stock

$($

units

$)$

$3$

$0$

$,$

$0$

$0$

$0$

$2$

$2$

$,$

$0$

$0$

$0$

$$

$$

The company incurred direct material and labour in addition to production and selling overheads per unit for both years as follows:

$$

Direct material $

$3$

$0$

$0$

$$ Variable production overheads $

$2$

$5$

$0$

$$

Direct labour $

$4$

$2$

$0$

$$ Variable selling and distribution $

$2$

$2$

$0$

$$

$$

The annual fixed production overheads are budgeted to be $

$9$

$0$

$0$

$,$

$0$

$0$

$0$

$$and the company expects to produce

$5$

$0$

$,$

$0$

$0$

$0$

$$headbands each year. Overheads are absorbed on a per unit basis. Actual fixed production overheads in

$2$

$0$

$2$

$2$

$$and

$2$

$0$

$2$

$3$

$$were $

$9$

$6$

$0$

$,$

$0$

$0$

$0$

$$and $

$1$

$,$

$2$

$3$

$0$

$,$

$0$

$0$

$0$

$$respectively$.$ Actual fixed administration cost for both years was $

$5$

$5$

$0$

$,$

$0$

$0$

$0$

$$per year with the selling price per unit being $

$1$

$,$

$2$

$5$

$0$

$.$

$$

$$

Required:

$($

a

$)$

$$Prepare the marginal costing income statements clearly showing the treatment of stock for

$$December

$3$

$1$

$,$

$2$

$0$

$2$

$2$

$$and

$2$

$0$

$2$

$3$

$.$

$($

$1$

$2$

$$marks

$)$

$$

$$

$($

b

$)$

$$Prepare the absorption costing income statements for December

$3$

$1$

$,$

$2$

$0$

$2$

$2$

$$and

$2$

$0$

$2$

$3$

$.$

$$

$($

$1$

$6$

$$marks

$)$

$$

$$

$($

c

$)$

$$Reconcile the income under both statements.

$($

$4$

$$marks

$)$

$$Question

$3$

$($

$4$

$1$

$$marks

$)$

Paper Sweets Supplies Limited is located in Kingston. On the last balance sheet date, inventory amounted to $

$1$

$2$

$,$

$5$

$0$

$0$

$,$

$0$

$0$

$0$

$.$

$$The entity conducted a stock count with the aim of valuing inventory for financial statements purposes. The count along with the relevant invoices indicated that there were

$2$

$,$

$5$

$0$

$0$

$$dairy

$-$

nut chocolate bars as at December

$3$

$1$

$,$

$2$

$0$

$2$

$2$

$$the last balance sheet date. Further investigations revealed that, this amount resulted from two different invoices. The following information relates to the

$2$

$,$

$5$

$0$

$0$

$$chocolate bars:

$$

Invoice Date Invoice Number Quantity Total cost

March

$2$

$,$

$2$

$0$

$2$

$2$

$$ XY

$1$

$5$

$2$

$4$

$4$

$,$

$0$

$0$

$0$

$$ $

$8$

$0$

$0$

$,$

$0$

$0$

$0$

$$

July

$2$

$2$

$,$

$2$

$0$

$2$

$2$

$$ XY

$2$

$0$

$0$

$5$

$2$

$,$

$5$

$0$

$0$

$$ $

$5$

$5$

$0$

$,$

$0$

$0$

$0$

$$

$$

The inventory controller states that

$6$

$0$

$\%$

$$of the inventory as at December

$3$

$1$

$,$

$2$

$0$

$2$

$2$

$$relates to March

$2$

$,$

$2$

$0$

$2$

$2$

$$invoice$,$ while, the remainder can be attributed to July

$2$

$2$

$,$

$2$

$0$

$2$

$2$

$.$

$$However$,$ the financial controller wants to ascertain the inventory balance as at December

$3$

$1$

$,$

$2$

$0$

$2$

$3$

$$for financial reporting purposes. The controller also understands that although the last

$-$

in

$-$

first out

$($

LIFO

$)$

$$method is not allowed by the international financial reporting standards

$($

IFRSs

$)$

$,$

$$it is acceptable by the US GAAP. Hence, although the company

$$

s policy is the average cost method, management wants to know the impact it has when used.

$$

Below are data relating to the receipt and issue of dairy

$-$

nut

$-$

chocolate bars during the period ended December

$3$

$1$

$,$

$2$

$0$

$2$

$3$

:

$$

Date Receipt Issue Unit cost

Jan.

$6$

$,$

$2$

$0$

$2$

$3$

$8$

$0$

$0$

$$ $

$4$

$5$

$0$

$$

Feb.

$1$

$0$

$,$

$2$

$0$

$2$

$3$

$7$

$0$

$0$

$$ $

$4$

$6$

$0$

$$

Mar.

$2$

$,$

$2$

$0$

$2$

$3$

$1$

$,$

$0$

$0$

$0$

$$ $

$2$

$3$

$0$

$$

Apr.

$1$

$,$

$2$

$0$

$2$

$3$

$1$

$,$

$4$

$0$

$0$

$$ $

$4$

$7$

$0$

$$

Jul.

$2$

$,$

$2$

$0$

$2$