Bookcases Ltd produces packs of book shelves for self assembly. The budgeted selling price and costs are as follows:
|
Budget for one unit: |
£ |
|
Selling price |
60 |
|
Direct materials |
36 |
|
Direct labour |
5 |
|
Variable production overhead Total variable cost |
3 44 |
The fixed production overhead cost for one month is budgeted as £40,000. The budgeted production volume is 5,000 units per month. In the month of February sales are lower than expected. At the start of March there are 200 unsold units in stock. Production is maintained at 5,000 units in the month of March.
Required
Calculate the profit for March under (a) absorption costing and (b) marginal costing for each of the following situations:
(1) Situation A: sales in March are 4,700 units
(2) Situation B: sales in March are 5,100 units