Reference no: EM132649580
Question - Two Left Feet Ltd manufactures a single product, the Claud. The following figures relate to the Claud for a one-year period,
Activity level 50% 100%
Sales and productions (units) 400 800
Shs Shs
Sales 8,000 16,000
Production costs: Variable 3,200 6,400
Fixed 1,600 1,600
Sales and distribution costs Variable 1,600 3,200
Fixed 2,400 2,400
The normal level of activity for the year is 800 units. Fixed costs are incurred evenly throughout The year, and actual fixed costs are the same as budgeted. There were no stocks of Clauds at the Beginning of the year. In the first quarter, 220 units were produced and 160 units sold.
(a) Calculate the fixed production costs absorbed by Clauds in the first quarter if absorption costing is used.
(b) Calculate the profit using absorption costing.
(c) Calculate the profit using marginal costing.
(d) A reconciling of profits and Explain why there is a difference between the answers to (c) and (d).