Reference no: EM132540128

Question - Pharma Medic is a manufacturer of healthcare product. For 2019, Pharma Medic budgeted to produce and sell 26,200 units. The company has no price, spending, or efficiency variances and writes off production-volume variance to the cost of goods sold. Actual data relating for 2019 are given as follows:

Variable Manufacturing Cost Per Unit RM24.00

Fixed Manufacturing Overhead Salary - Supervisor 36,000

Utility 40,000

Insurance 17,600

Factory maintenance 20,000

Beginning inventory 0 unit

Unit sold 25,000 units

Ending inventory 5,000 units

Selling price RM40

Additional information:

i. Variable manufacturing cost per unit includes 5% variable non-manufacturing costs.

ii. The 5% variable non-manufacturing costs is sales and administrative cost per unit sold.

iii. 52% of the fixed utility costs is for fixed sales and administrative costs.

iv. 71% of factory maintenance costs is for fixed sales and administrative costs.

Required -

a. Calculate cost per unit using variable and absorption costing.

b. Prepare Income Statement for Pharma Medic using variable and absorption costing.

c. Briefly explain the differences in profits obtained in requirement (b) under variable and absorption costing.