Reference no: EM132625430

Real Ltd Manufacturing operations for 2020 are as follows:

Per unit:                        $000

Sales price                         50

Direct material cost               18

Direct wages                       4

Variable production overhead       3

Per month:                              $000

Fixed production overhead          99 000

Fixed selling expenses               14 000

Fixed administration expenses     26 000

Variable selling expenses is 10% of sales value.

Normal budgeted capacity is 11 000 units per month.

Actual Performance

                                              January Units                       February Units

Sales                                         10,000                               12,000

Production                                      12,000                            10,000

The closing inventory of January becomes the opening inventory for February

Using the two methods:

Question 1: Compute the unit production cost

Question 2: Determine the value of the closing inventory

Question 3: Prepare the Marginal Income Statement and the Absorption Income Statement for January and February

Question 4: Reconcile the net profits for January and February