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5 marksMarginal and Absorption Costing

CAPE Accounting Unit 2 · 2008 · Paper 2 · Question 2(b)(ii)

Eldon Company produces and sells hand presses for moulding pastries. Selected cost and inventory data are provided for one year.

Prepare a variable costing income statement for the company.

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Other parts of this question

  1. 2(a)(i)Calculate the firm's pre-determined overhead application rate.[4 marks]
  2. 2(a)(ii)Prepare a job cost sheet for the Eldon Company job completed in March, showing clearly the traceable and non-traceable costs for the job.[7 marks]
  3. 2(a)(iii)Calculate the amount of over- or under-applied overhead (non-traceable) costs for Williams and Associates for 2007.[5 marks]
  4. 2(b)(i)a)Compute the unit product cost assuming that Eldon Company uses absorption costing.[3 marks]
  5. 2(b)(i)b)Compute the unit product cost assuming that Eldon Company uses variable costing.[2 marks]
  6. 2(b)(iii)Prepare an absorption costing income statement for the company.[5 marks]
  7. 2(b)(iv)Reconcile the difference between the net operating income computed under variable costing and that computed under absorption costing.[2 marks]
  8. 2(c)Outline ONE way in which activity-based costing differs from traditional costing methods.[2 marks]

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