Reference no: EM132522114

Trump Ltd has a production capacity of 200,000 units per year. Normal capacity utilization is reckoned as 90%. Standard variable production costs are Sh. 11 per unit. The fixed costs are Sh. 360,000 per year. Variable selling costs are Sh. 3 per unit and fixed selling costs are Sh. 270,000 per year. The unit selling price is Sh. 20. In the year just ended on 30th June 2018, the production was 160,000 units and sales were 150,000 units. The closing inventory on 30th June was 20,000 units. The actual variable production costs for the year were Sh. 35,000- higher than the standard.

Required:

Question 1: Calculate the profit for the year,

1. By the absorption costing method 
2. By the marginal costing method
3. Explain the difference in profit if found