A newly formed company has drawn up the following budgets for its first two accounting periods;
|
Period 1 |
Period 2 |
|
|
Sales units |
9 500 |
10 300 |
|
Production units(equivalent to normal capacity) |
10 000 |
10 000 |
The following budgeted information applies to both periods:
|
£ |
|
|
Selling price per unit |
6.40 |
|
Variable cost per unit |
3.60 |
|
Fixed production overhead per period |
15 000 |
(a) In period 1, the budgeted profit will be
(i) The same under both absorption costing and marginal costing.
(ii) £750 higher under marginal costing.
(iii) £750 higher under absorption costing.
(iv) £1400 higher under absorption costing.
(b) In period 2, everything was as budgeted, except for the fixed production overhead, which was £15 700.
The reported profit, using absorption costing in period 2, would be
(i) $12 300
(ii) $ 12 690
(iii) $13 140
(iv) $13 840