Reference no: EM132659929

FF Sdn. Bhd. produces and sells a single product. The following information is available for preparing the budgeted profit statement for financial year 2021: RM per unit Selling price 50 Direct material costs 10 Direct labour costs 4 Budgeted fixed production overheads will be RM200,000 per year absorbed based on an activity level of 40,000 units per year. Units per year Sales 60,000 Production 65,000 Opening stock 15,000 Fixed selling costs are budgeted to be RM400,000 per year and variable selling costs at RM1.50 per unit.

Required:

Question (a) Prepare the budgeted income statement for financial year 2021 using the marginal costing method.

Question (b) Reconcile the net profit calculated in part (a) above with the net profit under the absorption costing principle.

Question (c) Discuss the effects of marginal costing and absorption costing on inventory valuation and profit determination