Prepare the Income Statement for the year ended 31 December 2021 using the absorption costing method.
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Umdloti Ltd, which manufactures liquid hand soap, commenced operations on 01 November 2021. Standard production for a typical month is expected to be 160 000 bottles. During November 2021 the company manufactured 170 000 bottles of hand soap. On 30 November 2021 there were 46 000 bottles of hand soap in inventory. Manufacturing and commercial costs during November 2021 were as follows: Direct materials R212 500 Direct labour R680 000 Variable manufacturing overheads R37 400 Variable marketing costs R135 160 Fixed administration costs R84 320 Fixed manufacturing overheads R113 900 The hand soap was sold at R12 per bottle during November 2021. During December 2021, Umdloti Ltd decided to increase the selling price by 10% because the fixed
Question 1: Prepare the Income Statement for the year ended 31 December 2021 using the absorption costing method.
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- Umdloti Ltd, which manufactures liquid hand soap, commenced operations on 01 November 2021. Standard production for a typical month is expected to be 160 000 bottles. During November 2021 the company manufactured 170 000 bottles of hand soap. On 30 November 2021 there were 46 000 bottles of hand soap in inventory. Manufacturing and commercial costs during November 2021 were as follows: Direct materialsDirect labourVariable manufacturing overheads Variable marketing costsFixed administration costsFixed manufacturing overheadsR212 500 R680 000 R37 400 R135 160 R84 320 R113 900 The hand soap was sold at R12 per bottle during November 2021. During December 2021, Umdloti Ltd decided to increase the selling price by 10% because the fixed manufacturing costs increased by R27 100 and the variable marketing costs increased by R0.11 per unit sold with effect from 01 December 2021. The company manufactured 150 000 bottles of hand soap during December 2021. There were 27 000 bottles of hand soap…Umdloti Ltd, which manufactures liquid hand soap, commenced operations on 01 November 2021. Standard production for a typical month is expected to be 160 000 bottles. During November 2021 the company manufactured 170 000 bottles of hand soap. On 30 November 2021 there were 46 000 bottles of hand soap in inventory. Manufacturing and commercial costs during November 2021 were as follows: Direct materials R212 500 Direct labour R680 000 Variable manufacturing overheads R37 400 Variable marketing costs R135 160 Fixed administration costs R84 320 Fixed manufacturing overheads R113 900 The hand soap was sold at R12 per bottle during November 2021. During December 2021, Umdloti Ltd decided to increase the selling price by 10% because the fixed manufacturing costs increased by R27 100 and the variable marketing costs increased by R0.11 per unit sold with effect from 01 December 2021. The company manufactured 150 000 bottles of hand soap during December 2021. There were 27 000 bottles…VARIABLE COSTING AND ABSORPTION COSTINGUmdloti Ltd, which manufactures liquid hand soap, commenced operations on 01 November 2021. Standard production for a typical month is expected to be 160 000 bottles. During November 2021 the company manufactured 170 000 bottles of hand soap. On 30 November 2021 there were 46 000 bottles of hand soap in inventory. Manufacturing and commercial costs during November 2021 were as follows:Direct materials R212 500Direct labour R680 000Variable manufacturing overheads R37 400Variable marketing costs R135 160Fixed administration costs R84 320Fixed manufacturing overheads R113 900The hand soap was sold at R12 per bottle during November 2021. During December 2021, Umdloti Ltd decided to increase the selling price by 10% because the fixed manufacturing costs increased by R27 100 and the variable marketing costs increased by R0.11 per unit sold with effect from 01 December 2021. The company manufactured 150 000 bottles of hand soap during December 2021.…
- Dan Wood Ltd commenced business on 1st January 2020 making one product only, which sells for K160 per item. The production and sales data for each of the first three months of 2020 was as follows: January February March Sales in units 2,400 2,500 3,800 Production in units 2,700 2,400 4,000 Actual information for each month was as follows: Direct materials 3 kilograms at K5 per kilogram Direct labour 4 hours at K10 per hour Variable production overheads 150% of direct labour Sales commission 10% of sales value Fixed production overheads K10,000 Fixed selling overheads K35,000 There was no opening inventory at the start of January. Fixed production overheads are budgeted at K120,000 per annum and are absorbed into products based on a budgeted normal output of 30,000 units per annum Required: (a) Prepare a profit statement for each of the three months using absorption costing principles (b) Prepare a profit statement for each of the three months using marginal…Dan Wood Ltd commenced business on 1st January 2020 making one product only, which sells for K160 per item. The production and sales data for each of the first three months of 2020 was as follows: January February March Sales in units 2,400 2,500 3,800 Production in units 2,700 2,400 4,000 Actual information for each month was as follows: Direct materials 3 kilograms at K5 per kilogram Direct labour 4 hours at K10 per hour Variable production overheads 150% of direct labour Sales commission 10% of sales value Fixed production overheads K10,000 Fixed selling overheads K35,000 There was no opening inventory at the start of January. Fixed production overheads are budgeted at K120,000 per annum and are absorbed into products based on a budgeted normal output of 30,000 units per annum Required: Prepare a profit statement for each of the three months using marginal costing principles.Dan Wood Ltd commenced business on 1 January 2020 making one product only, which sells for K160 per item. The production and sales data for each of the first three months of 2020 was as follows: January February March Sales in units 2,400 |2,500 3,800 Production in units 2,700 |2,400 4,000 Actual information for each month was as follows: Direct materials 3 kilograms at K5 per kilogram 4 hours at K10 per hour Variable production overheads 150% of direct labour 10% of sales value Direct labour Sales commission Fixed production overheads Fixed selling overheads K10,000 K35,000 There was no opening inventory at the start of January. Fixed production overheads are budgeted at K120,000 per annum and are absorbed into products based on a budgeted normal output of 30,000 units per annum Required: (a) Prepare a profit statement for each of the three months using absorption costing principles (b) Prepare a profit statement for each of the three months using marginal costing principles. (c)…
- QUESTION 4 Answer the questions from the information provided. 4.1 Study the ratios given below that were calculated for Project Mel for 2020 and 2019 and provide suitable comments for each one. INFORMATION 2020 2019 Operating profit margin 20% 14% Trade receivables period 35.78 days 28.75 days Acid test ratio 0.88:1 1.25:1 Return on capital employed 15.63% 21.67% Additional information : The interest rate on loans is 16%. : The credit terms to debtors are 30 days. 4.2 Use the information provided below to calcutate and comment on the following variances for September 2020. Your answers must indicate whether the variance is favourable or adverse. 4.2.1 Direct material usage variance 4.2.2 Variable overheads efficiency variance 4.2.3 Direct labour rate variance 4.2.4 Direct labour efficiency variance.The Molis Company has the capacity to produce 15,000 haks each month. Current regular production and sales are 10,000 haks per month at a selling price of P15 each. Based on this level of activity, the following unit costs are incurred: Direct materials P5.00 Direct labor 3.00 Variable manufacturing overhead 0.75 Fixed manufacturing overhead 1.50 Variable selling expense 0.25 Fixed administrative expense 1.00 The fixed costs, both manufacturing and administrative, are constant in total within the relevant range of 10,000 to 15,000 haks per month. The Molis Company has received a special order from a customer who wants to pay a reduced price of P10 per hak. There would be no selling expense in connection with this special order. And, this order would have no effect on the company's other sales. 1. Suppose the special order is for 4,000 haks this month. If this offer is…The Molis Company has the capacity to produce 15,000 haks each month. Current regular production and sales are 10,000 haks per month at a selling price of P15 each. Based on this level of activity, the following unit costs are incurred: Direct materials P5.00 Direct labor 3.00 Variable manufacturing overhead 0.75 Fixed manufacturing overhead 1.50 Variable selling expense 0.25 Fixed administrative expense 1.00 The fixed costs, both manufacturing and administrative, are constant in total within the relevant range of 10,000 to 15,000 haks per month. The Molis Company has received a special order from a customer who wants to pay a reduced price of P10 per hak. There would be no selling expense in connection with this special order. And, this order would have no effect on the company's other sales. 1. Suppose the special order is for 4,000 haks this month. If this offer is…
- Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. Selling price per unit.. $50.00 Production Costs: Direct Materials $10.00 Direct Labour $8.00 Variable Manufacturing Overhead $7.00 Fixed Manufacturing Overhead.... $450,000 .. .. Fixed Selling & Administrative Expenses.... $300,000 Variable selling expense per unit $10.00 d) Assuming sales equal to the normal capacity calculated in a) above, prepare a contribution margin income statement for the year ended December 31, 2020, detailing the components of total variable costs and total fixed costs, and clearly showing contribution and net income. e) The recession in the economy in 2021 is expected to result in a reduction of the number of units sold.…Apex Corporation estimates that its production for the coming year will be 10,000 units with the following unit costs: Direct materials P40 Direct labor P60 Direct labor is paid at the rate of P24 per hour. The machine should be run for 20 minutes to produce one unit. Total estimated overhead is expected to consist of P400,000 for variable overhead and P400,000 for fixed overhead. What is the predetermined overhead rate based on units of production? B P80 per unit D P65 per unit CP85 per unit P75 per unitGreek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. $50.00 Selling price per unit.. Production Costs: Direct Materials $10.00 Direct Labour $8.00 Variable Manufacturing Overhead Fixed Manufacturing Overhead.. $7.00 $450,000 $300,000 Fixed Selling & Administrative Expenses.. Variable selling expense per unit . $10.00 Required:
