Question 2.Pinafore Ltd manufactures and sells a single product. The budgeted profit statement for this month, which habeen prepared using marginal costing principles, is as follows:GHC'000GH¢000Sales (24,000 units)864Less Variable production cost of sales:Opening stock (3,000 units)Production (22,000 units)69506Closing stock (1,000 units)(23)(552)312Less Variable selling cost(60)Contribution252Less Fixed overhead costs:Production125Selling and administration40(165)Net profit87The normal monthly level of production is 25,000 units and stocks are valued at standard cost.Required:(a) Prepare in full a budgeted profit statement for this month using absorption costing principles. AssumethatFixed production overhead costs are absorbed using the normal level of activity.(b) Prepare a statement that reconciles the net profit calculated in (a) with the net profit using marginalcosting.(c) Which of the two costing principles (absorption or marginal) is more relevant for short-run decision-making, and why?

Marginal costing, as well as absorption costing, seem to be three distinct strategies to inventory…

Question 2. Pinafore Ltd manufactures and sells a single product. The budgeted profit statement for this month, whic been prepared using marginal costing principles, is as follows: GHC'000 GH¢000 Sales (24,000 units) Less Variable production cost of sales: Opening stock (3,000 units) Production (22,000 units) 864 69 506 Closing stock (1,000 units) (23) (552)

Question 2. Pinafore Ltd manufactures and sells a single product. The budgeted profit statement for this month, whic been prepared using marginal costing principles, is as follows: GHC'000 GH¢000 Sales (24,000 units) Less Variable production cost of sales: Opening stock (3,000 units) Production (22,000 units) 864 69 506 Closing stock (1,000 units) (23) (552)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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