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Zurich International Ltd manufactures a single product. For the month of December 2021, the company...

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Accounting

Zurich International Ltd manufactures a single product. For the month of December 2021, the company sold 6,000 units of the product at $650 each. On December 01, 2021 there were 460 units in store, while on December 31, 2021 inventory on hand was counted to be 650 units. The company has a budgeted capacity of 6,800 units. The following table shows cost information for the product that was extracted from the companys accounting records.

Cost per unit

Details $
Direct materials 90
Direct labour 80
Direct expense 20
Production overheads 60
250

Administrative and selling overheads for December 2021 were budgeted at $340,000 and 480,000 respectively. The companys records also revealed that forty-five percent (45%) of the production overheads were fixed.

Required:

(a) Determine the amount of production for December 2021. (2 marks)

(b) What was the marginal cost per unit for December 2021? (2 marks)

(c) Prepare the income statement showing profit for December using marginal costing techniques. (11 marks)

(d) Prepare the income statement showing profit for December using absorption costing techniques. (12 marks)

(e) Reconcile the above profit numbers for management. (3 marks)

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