Reference no: EM132562082

Umair Limited provides you the following information at 80% capacity:

Production & Sales 30,000 units

                                                            Rs.

Direct Material                         4 per unit

Direct Labour                         3 per unit

Direct Expenses                           3 per unit

Production Overheads (70%-Fixed) 4 per unit

Administrative Overheads (15%- Variable) 2 per unit

Selling & Distribution Overhead (35%- Variable) 3 per unit

Selling Price 50 per unit

Required

Question a) Prepare Income Statement using Direct Costing Method on Normal Capacity

Question b) Why companies use the direct costing method and what is mean by it.