ACCA MA · Guided practice (Show me how)
Chapter 9: The Management Accountant’s Profit Statement – Absorption Costing
The management accountant's profit statement - absorption costing
X plc produces one product, desks.
Each desk is budgeted to require 4 kg of wood at $3 per kg, 4 hours of labour at $2 per hour, and variable production overheads of $5 per unit.
Fixed production overheads are budgeted at $20,000 per month and average production is estimated to be 10,000 units per month.
The selling price is fixed at $35 per unit. There is also a variable selling cost of $1 per unit and a fixed selling cost of $2,000 per month.
During the first two months X plc expects: January - production 11,000 units, sales 9,000 units; February - production 9,500 units, sales 11,500 units. All other results are as budgeted.
(a) Cost card - absorption costing
Prepare X plc's absorption costing cost card for one desk for January and February, and state the standard profit per unit.
(b) Profit statement - January
Prepare the profit statement for January, when 11,000 units were produced and 9,000 sold.
(c) Profit statement - February
Prepare the profit statement for February, when 9,500 units were produced and 11,500 sold.
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