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10 marksMarginal and Absorption Costing

CAPE Accounting Unit 2 · 2017 · Paper 2 · Question 2(b)(ii)

Peyton Manufacturing produces a single product. Unit selling price is 80, direct materials 25, direct labour 10, variable factory overhead 5. Fixed factory overhead is 2 200 000 and fixed selling/administrative cost is 800 000. Planned production was 275 000 units; actual production was 200 000 units and 180 000 units were sold in 2016 (no opening inventory).

Prepare the income statement for 2016 using absorption costing.

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Other parts of this question

  1. 2(a)(i)Name and describe ONE costing system, other than activity-based costing, which may be used to cost job XYZ.[4 marks]
  2. 2(a)(ii)Calculate the unit cost for job XYZ using activity-based costing.[9 marks]
  3. 2(b)(i)Prepare the income statement for 2016 using marginal costing.[8 marks]
  4. 2(c)Explain the difference between 'absorption costing' and 'marginal costing'.[4 marks]

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