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Suppose that a company makes and sells a single product. At the beginning of period 1, there are no opening stocks of the product, for which the variable production cost is Ksh.4 and the sales price Ksh.6 per unit. Fixed costs are Ksh.2,000 per period, of which Ksh.1,500 are fixed production costs
Period
Period 2
Sales
1,200 units
1,800 units
Production
1,500 units
What would the profit be in each period using the following methods of costing?
Absorption costing. Assume normal output is 1,500 units per period.
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