Reference no: EM133105639
Question - Case Scenario - Swipe 50 limited manufactures a specialized screen protector for laptops computers. The plus swipe is a screens protector that prevents scratches on laptop screens. The company has been in operation for 3 years and now that company has refined its production process, the directors have decided to focus on the income and cost arising from the activities. Therefore, the CFO, Tamara J. Blooms, wants to focus on product costing. She wants to look into how both absorption and variable costing affect the profits of the company. The following information is available for the month February and March: (units)
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February
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March
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Production (units)
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12,500
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14,500
|
|
Sales (units)
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11,500
|
15,500
|
|
Direct Materials
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€ 29,000
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€ 33,250
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Direct Labor
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€ 19,000
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€ 22,000
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Variable Production Overhead
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€ 7,300
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€ 8,500
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Total Selling and Administrative Expenses
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€ 44,500
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€ 57,100
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Additional Information
1. Swipes 50 Ltd. production capacity 20,000 units per month.
2. Fixed production overheads are €28,600 per month.
3. Swipe 50 sells Plus Swipes at €22 each.
4. On 31st January, the company's warehouse has no Plus Swipes in inventory.
5. Fixed and variable elements (variable portion is incurred based on units sold) are included in the total administration expenses.
Required - Please create a report for 50 swipes limited and please include the following in your report.
Q1. Prepare a profit statement for Swipe 50 Limited for the month of February and March using:
1. Absorption costing
2. Variable costing
Q2. Reconcile the profit calculated using absorption costing to that using variable costing.
Q3. Explain how each method differs from the other method and also explain the importance of the each method.
1. Explain three ways that Swipes 50 Ltd. can improve its accounting systems.
2. State why managing accounting jobs are important in Manufacturing Company.