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AA025 Chapter AT8

1. The document provides costing information for Qaseh Sdn Bhd, including manufacturing costs per unit, non-manufacturing costs, activity levels, and overhead variances. It asks to compute unit costs using absorption and marginal costing, and prepare the corresponding income statements and reconcile the difference. 2. For Beres Sdn Bhd, it provides production, sales, cost, and activity information and asks to compute and explain the difference between absorption and marginal costing income, and prepare the income statements. 3. For MZR Sdn Bhd, it provides cost and activity information for 2015 and asks to indicate the difference between marginal and absorption costing income without preparing statements, and

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159 views3 pages

AA025 Chapter AT8

1. The document provides costing information for Qaseh Sdn Bhd, including manufacturing costs per unit, non-manufacturing costs, activity levels, and overhead variances. It asks to compute unit costs using absorption and marginal costing, and prepare the corresponding income statements and reconcile the difference. 2. For Beres Sdn Bhd, it provides production, sales, cost, and activity information and asks to compute and explain the difference between absorption and marginal costing income, and prepare the income statements. 3. For MZR Sdn Bhd, it provides cost and activity information for 2015 and asks to indicate the difference between marginal and absorption costing income without preparing statements, and

Uploaded by

norismah isa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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AA025

CHAPTER 8 ABSORPTION COSTING AND MARGINAL COSTING


EXTRA QUESTIONS

Question 1

Qaseh Sdn Bhd, began business last year making decorated pottery platters. The unit costs
on a normal costing basis are as follows:

Manufacturing costs (per unit):


RM
Direct materials (1.5 kg @ RM2) 3.00
Direct labour (2 kg @ RM9) 18.00
Variable overhead (2 hrs. @ RM2.50) 5.00
Fixed overhead (2 hrs. @ RM3.25) 6.50
Total 32.50

Non-manufacturing costs:

Variable 15% of sales


Fixed RM230,000

During the year, the company had the following activity:

Units produced 30,000


Units sold 27,400
Unit selling price RM50
Direct labour hours worked 60,000

Actual fixed overhead was RM10,000 greater than budgeted fixed overhead. Actual variable
overhead was RM5,000 greater than budgeted variable overhead. The company
used an expected actual activity level of 60,000 direct labour hours to compute the pre-
determined overhead rates. Any overhead variances are closed to Cost of Goods Sold.

Required:

1. Compute the unit cost using (a) absorption costing and (b) marginal costing.

2. Prepare an absorption costing income statement.

3. Prepare a marginal costing income statement.

4. Reconcile the difference between the two income statements.


Question 2

The following information pertains to the first year of operation for Beres Sdn Bhd:

Units produced 94,500


Expected actual production 100,000
Units sold 93,000
Unit selling price RM10

Costs:
Budgeted (and actual) fixed overhead 200,000
Budgeted (and actual) variable overhead 150,000
Total cost of direct materials used 236,250
Total cost of direct labour 198,450
Variable selling and administrative 46,500
Fixed selling and administrative 100,000

Any under or over-applied overhead is closed to Cost of Goods Sold.

Required:

1. Without preparing formal income statements, compute the difference that will exist
between absorption costing and marginal costing income.
2. Prepare absorption costing and marginal costing income statements.
Question 3

The following information pertains to MZR Sdn Bhd, for 2015:

Beginning inventory in units -

Units produced 30,000


Units sold 27,000
Ending inventory in units 8,000

Variable costs per unit:


Direct materials RM10.00
Direct labour 6.00
Variable overhead 3.50
Variable selling expenses 5.00

Fixed costs per year:

Fixed overhead RM105,000


Fixed selling and administrative 25,000

There are no work-in-process inventories. Normal activity is 30,000 units. Expected and
actual overhead costs are the same.

Required:

1. Without preparing an income statement, indicate what the difference will be between
marginal costing income and absorption costing income.

2. Assume the selling price per unit is RM50. Prepare an income statement (a)
using marginal costing and (b) using absorption costing.

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