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7 marksMarginal and Absorption Costing

CAPE Accounting Unit 2 · 2012 · Paper 2 · Question 2(a)(ii)

Aqualead Ltd produces orange juice. Budgeted production: 60 000 units, actual: 64 000 units. Budgeted sales: 58 000 units, actual: 62 000 units. Variable production cost: budget 3 000 000, actual 3 200 000. Fixed production overhead: budget 600 000, actual 625 000. Fixed selling overhead: budget 450 000, actual 450 000. Predetermined overhead rate per unit. Selling price 95 per bottle. Opening inventory on 1 April 2010 was 3 500 units valued at 210 000, including fixed production overhead of $35 000.

Prepare an absorption costing income statement for the company.

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Other parts of this question

  1. 2(a)(i)Prepare a marginal costing income statement for the company.[7 marks]
  2. 2(a)(iii)Reconcile the difference between the net operating income computed under marginal costing and that computed under absorption costing.[2 marks]
  3. 2(b)(i)Prepare the job cost sheet for Akupa Engineering Ltd.[12 marks]
  4. 2(b)(ii)Calculate the quotation price for the job.[3 marks]
  5. 2(c)List FOUR benefits that Akupa Engineering Ltd. could gain from using the Activity-Based Costing approach instead of the Traditional Approach to costing.[4 marks]

More practice: the rest of this paper · more Marginal and Absorption Costing questions · all CAPE Accounting Unit 2 past papers