Bailey plc commenced business

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Bailey plc commenced business on 1 March making one product only, the standard cost of
which is as follows:
The
fixed production overhead figure has been calculated on the basis of a budgeted normal
output of 36,000 units per annum. The actual fixed production overhead incurred in March
and April was £15,000 each month.
Selling, distribution and administration expenses are:
Fixed
£10,000 per month
Variable
15% of the sales value
The selling price per unit is £35 and the numbers of units produced and sold were:
March
(Units)
April
(Units)
Production
2,000
3,200
Sales
1,500
3,000
Required:
(a)
Prepare profit statements for each of the months of March and April using:
(i)
(ii)
absorption costing; and
marginal costing.
(b)
Present a reconciliation of the profit or loss figures given in your answers to (a).
£
Direct labour
5
Direct material
8
Variable production overhead
2
Fixed production overhead (Budgeted rate)
5
___
Standard production cost/unit
£20
___

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