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Determine the Absorption Costing profit

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Reference no: EM132940533

Problem - Absorption Costing vs. Direct Costing Scenarios:

Scenario 1: Company A sells widgets; during 2013 they sold 10,000 units at a selling price of R150.

Production amounted to 10000 units variable costs incurred was R80.

Opening inventory was 5000 units with a value of R500 000 (under absorption costing).

Fixed manufacturing overheads for 2013 amounted to R200 000

Scenario 2: Company A sells widgets; during 2013 they sold 10,000 units at a selling price of R150.

Production amounted to 8000 units variable costs incurred was R80.

Opening inventory was 5000 units with a value of R500 000 (under absorption costing).

Fixed manufacturing overheads for 2013 amounted to R200 000

For all 2 scenarios the normal capacity is 10 000 units. Fixed manufacturing overheads rate for 2012 was R20 per unit.

REQUIRED - For each scenario determine the Absorption costing profit as well as the variable costing profit.

Reference no: EM132940533

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