Determine the amount of stock in store at the start of the month.?

At the end of September 2016, there were 880 units of a product manufactured by Kings Unlimited Company. The company has a budgeted capacity of 7,000 units and during the month, one unit of the product was sold for $1,500. Production and sales for the month amounted to 6,500 units and 5,800 units respectively. Administrative, selling and production overheads were estimated at $820,000, $780,000 and $910,000 respectively. The following information relating to the product was also extracted from the financial records:

Cost per unit

Details $

Direct materials 250

Direct labour 275

Variable overheads 2 45

Total 770

Required:

(a) Determine the amount of stock in store at the start of the month.

(b) Calculate the full cost per unit of production for September 2016.

(c) Prepare profit statement for the month using Marginal Costing.

(d) Prepare profit statement for the month using Absorption Costing.

(e) Reconcile the profit results obtained using both product costing methods.

(f) State two advantages of Absorption Costing.

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