Prepare profit statements for each month using marginal cost

Reference no: EM133332020

Question: Ridhin Co Ltd is a company that manufactures and sells a specific spare part for Land Rovers. The following budgeted/actual information is provided in relation to the production of this spare part. $ Selling price per unit 1,000 Direct materials per unit 200 Direct labour per unit 150 Variable production overhead per unit 250 Details for the months of March and April 2021 are as follows: March April Production of spare part (units) 5,000 4,500 Sales of spare part (units) 4,000 6,000 Fixed production overheads are budgeted at Rs 50,000 per month and are absorbed on a unit basis. The normal level of production is budgeted at 5,000 units per month. Other costs Fixed selling $ 10,000 per month Fixed administration $ 8,000 per month Variable sales commission 10% of sales revenue There is an opening inventory of 1,000 spare parts on 1st March 2021.

(a) Prepare profit statements for each month using: (i) Marginal costing (ii) Absorption costing

(b) Prepare a statement reconciling the marginal with the absorption profit for the month.

Reference no: EM133332020

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