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Question:
A company produces and sells a single product, the standard unit cost details of which are as follows:
Direct material 2 kilos x Rs4.5 per kilo Direct labour 3 hours x Rs5 per hour Variable overhead 3 hours x Rs3 per hour
The total fixed overhead is budgeted at Rs90,000 per month and is absorbed on a rate per unit basis. The budgeted output per month is 15,000 units. The product has a standard selling price of Rs50 per unit.
The following activity took place during January and February:
There is an opening stock on 1 January of 3,000 units. Required: a) Calculate the standard cost and profit for one unit of output. b) Prepare profit statements for each month using: (i) Marginal costing (ii) Absorption costing c) Prepare a statement reconciling the marginal with the absorption profit for each month.
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