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X plc produces one product - desks.
Each desk is budgeted to require 4 kg of wood at $3 per kg, 4 hours of labour at $2 per hour, and variable production overheads of $5 per unit. Fixed production overheads are budgeted at $20,000 per month and average production is estimated to be 10,000 units per month. The selling price is fixed at $35 per unit. There is also a variable selling cost of $1 per unit and fixed selling cost of $2,000 per month.
During the first two months X plc expects the following levels of activity:
January February
Production 11,000 units 9,500 units
Sales 9,000 units 11500 units
Question (a) Write a cost card using absorption costing
Question (b) Set out budget Profit Statements for the months of January and February.
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