Reference no: EM132561043

Modem Metal Works details in German Silver Sets; the standard production cost of which is as under:

                                                                              Rs.

Direct material           4kg @ Rs.35                             140

Direct labour                 3 Hrs @ Rs.30                        90

F.O.H- Variable                                                           15

Fixed                                                                      100

Total cost                                                                 345

Normal output is 16,000 units per annum, costs relating to selling, distribution and administration are:

Variable        20% of sales value

Fixed             Rs.900,000 per annum

The only variance is fixed (production) OH volume variance.

There are no sets in finished goods stock as on 1st April 2002. The fixed overheads expenditure is spread throughout the year. The selling price per set is Rs.700. The numbers of sets to be produced and sold are budgeted are:

Six month ending                          Six month ending

30th September 2002                      31st March 2003

Production 8,500                              7,000

Sales 7,000                                       8,000

Required:

Question (i) Prepare statements showing sales, costs of sales and profit for each six month period, using:

· Marginal costing

· Absorption costing

Question (ii) an explanatory statement reconciling each six months period profit using marginal costing with that of absorption costing.