Prepare profit statements for the year ended december

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Alpha Limited is a company that produces surgical spirit which is bottled and sold in cases. The normal annual level of production on which the fixed production overhead absorption is based is 120,000 cases.

Data for the most recent financial year ended 31 December 2019 are as follows:

Production                          145,000 cases
Sales                                  112,000 cases
Selling price sh.                  2,000 per case
Cost: Direct material            600
Direct labour                      520
Variable overhead                250
Fixed Production Overhead    1,820,000
Variable Selling & Distribution Cost 10% of sales revenue
Fixed Selling and Distribution Cost sh. 234,000

Assume no opening stocks.

Question 1: You are required to prepare profit statements for the year ended 31 December 2019 based on

(a) Marginal Costing
(b) Absorption Costing 
(c) A statement to reconcile the profits from marginal and absorption costing

Reference no: EM132644758

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