a) Prepare the absorption costing and marginal costing income statements for 1st quarter, 2021 b) Reconcile the profits in (a) above 3 c) State two (2) differences between absorption costing and marginal costing approaches d) What is the meaning of slack under limiting factor analysis?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The following data have been extracted from the budgets and
GH¢ per unit
Selling price 60
Direct material 15
Direct labour 10
Variable production
Fixed production overhead costs are budgeted at GH¢ 700,000 per annum. Normal production
levels are thought to be 350,000 units per annum.
Selling and distribution expenses are:
Fixed GH¢ 20,000 per month
Variable 5% of the sales value
Administration costs are GH¢ 200,000 per annum.
The following trends of sales and production are expected during the first quarter of 2021
Units
Production 80,000
Sales 70,000
There were no opening inventories.
REQUIRED:
a) Prepare the absorption costing and marginal costing income statements for 1st quarter, 2021
b) Reconcile the profits in (a) above
3
c) State two (2) differences between absorption costing and marginal costing approaches
d) What is the meaning of slack under limiting factor analysis?
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