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2 marksMarginal and Absorption Costing

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

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

Reconcile the difference between the net operating income computed under variable costing and that computed under absorption costing.

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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)(ii)Prepare a variable costing income statement for the company.[5 marks]
  7. 2(b)(iii)Prepare an absorption costing income statement for the company.[5 marks]
  8. 2(c)Outline ONE way in which activity-based costing differs from traditional costing methods.[2 marks]

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