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Statement using Absorption costing system

A company manufactures a single product. The company sells its entire production as soon as it is manufactured; consequently, there is neither opening nor closing stock of finished goods. The company uses just in time ordering and the production cycle is very short, with the result that opening and closing stocks of raw materials and work in progress are negligible. The standard cost card for the product is as follows:

Selling, distribution and administration expenses, costing £15,000 in May 2005, are excluded from standard cost - they are deducted from profit as a period charge. Budgeted output for May 2005 was 5,100 units. Actual output was of 4,850 units, which were sold for £95,600. Materials consumed amounted to 2,300 kg at a cost of £9,800. Labour hours cost £16,800 and amounted to 8,500 hours. Variable overheads cost £2,600 and fixed overheads cost £42,300.

how would i prepare a statement under an absorption costing system, using variance analysis reconciling the budgeted with actual profit for the month of May 2005.

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A company manufactures a single product. The company sells its entire production as soon as it is manufactured; consequently, there is neither opening nor closing stock of finished goods. The company uses just in time ordering and the production cycle is very short, with the result that opening and closing stocks of raw materials and work ...

Solution Summary

This explains the computation of financial statement using Absorption costing system

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