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Question - The manufacturing company Z SA produces an office chair, which it owns in a large chain of furniture sales. The budget data of Z for the use of 20X6 for each chair are as follows:
Price 50€
Raw materials 30€
Direct work 6€
Variable General Industrial Costs 4€
Total variable costs 40€
The budgeted fixed monthly overheads are 36.000€. The budgeted production for each month is fixed at 6000 pieces.
Required -
1. To determine the operating result of Z S.A. for the month of March 20X6 on the basis of a) the full (absorbent) and b) the direct (variable) costing, taking into account that 5000 pieces were sold that month and that the stock of finished products at the beginning of March was 500 pieces with the production being kept stable at 6000 pieces.
2. Mention the main advantages of direct (variable) costing.
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