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    Profit Statements Using Absorption Costing

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    Gerry Hatrick Ltd manufactures and sells video cameras. The unit selling price and production costs are as follows:
    $
    Selling price 800
    Direct materials 100
    Direct labour 90
    Variable overheads 50
    Fixed overheads 160
    The fixed production overheads assume a monthly production of 2000 units.
    The following monthly costs are also incurred:
    Fixed administrative overheads $80000
    Variable sales overheads 10% of sales value
    Fixed sales overheads $120000

    I
    During the month of September 2005 a total of 2400 units were produced, of which 1800 were sold. There was no stock on hand at the beginning of September.

    (a) Prepare profit statements for September 2005 using

    (i) Absorption costing
    (ii) Marginal costing

    (b) Explain why the profit found when using absorption costing differs from the profit found in marginal costing.
    (c) Calculate the break-even point for September 2005 in sales volume.

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    https://brainmass.com/business/financial-statements/profit-statements-absorption-costing-66735

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    Please see the attached file.erry Hatrick Ltd manufactures and sells video cameras. The unit selling price and production costs are as follows:
    $
    Selling price 800
    Direct materials 100
    Direct labour 90
    Variable overheads 50
    Fixed ...

    Solution Summary

    This provides the steps to prepare profit statements using absorption costing and marginal costing.

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