Reference no: EM132530544
Question 1: Using the information provided below for the first three years of Delight Bakery Ltd.'s first three years of operations, produce financial reports that accurately apply and interpret data for a range of business activities. Calculate the costs using appropriate techniques of cost analysis to prepare an income statement by applying Absorption costing and Marginal costing.
A. All fixed bakery overhead is £9,000 per annum.
B. Direct labour costs over each of the three years is £3 per unit.
C. Direct material costs over each of the three years £5 per unit.
D. Variable overheads which vary in direct ratio to production were £2 per unit.
E. Sales are:
Year 1 900 units
Year 2 1,200 units
Year 3 1,100 units.
The selling price remained constant at £29 per unit.
F. Production is at the rate of: Year 1 1,200 units Year 2 1,300 units: Year 3 1,250 units.
Question 2: What is the minimum number of units that Mr. Smith needs to sell per year (for one of his products Fresh Cream cakes) for him to make a profit? Use the formula method.
Product Fresh Cream Cakes
Revenue £500,000
Fixed costs £50,000
Cost of sales £200,000
Gross profit £300,000
Selling price £30
Total overheads £150,000
Net profit £150,000
Variable costs £20