The table below sets out data for the Mobile Phone Manufacturing Company for the four quarters of Year 1.
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£ |
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Selling price per unit |
120 |
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Variable cost per unit |
70 |
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Fixed overhead production cost for each quarter |
20,000 |
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Qtr 1 units |
Qtr 2 units |
Qtr 3 units |
Qtr 4 units |
Total |
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Planned production |
1,000 |
1,000 |
1,000 |
1,000 |
4,000 |
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Actual production |
1,000 |
1,000 |
900 |
1,100 |
4,000 |
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|
|
Actual sales |
900 |
1,100 |
900 |
1,100 |
4,000 |
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The fixed overhead production cost for each month is based on budgeted production of 1,000 units per quarter. The fixed overhead is absorbed into products on the basis of a predetermined overhead rate of £20 per unit. Actual production fluctuates in quarters 3 and 4 due to labour problems. Actual sales fluctuate each quarter due to seasonal factors but the company meets its target for production and sales over the year as a whole.
Required
Prepare a statement of quarterly profit for each of the four quarters of Year 1 using:
(a) absorption costing; and
(b) marginal costing.