Reference no: EM132951191

Question - The following information is available for a firm producing and selling a single product:

Budgeted costs (at normal activity) (Sh.'000')

Direct materials and labour 264

Variable production overhead 48

Fixed production overhead 144

Variable selling and administration overhead 24

Fixed selling and administration overhead 96

The overhead absorption rates are based upon normal activity of 240,000 units per period. During the period just ended 260,000 units of product were produced, and 230,000 units were sold at Sh.3 per unit. At the beginning of the period 40,000 units were in stock. These were valued at the budgeted costs shown above. Actual costs incurred were as per budget.

Required -

a) Calculate the fixed production overhead absorbed during the period, and the extent of any under/over absorption. For both of these calculations you should use absorption costing.

b) Calculate profits for the period using absorption costing and marginal costing respectively.

c) Reconcile the profit figures which you calculate.