Question 1: Mill Stream makes two products, the Mill and the Stream. Information association to each of such products for April 2011 is as shown below:
Required: By using marginal costing principles, compute the profit in April 2011.
Question 2: Marginal costing and absorption costing are different methods for assessing profit in a period.
Reported profit figures by using marginal costing or absorption costing will differ if there is any change in the level of inventories in the period. If production is equivalent to sales, there will be no difference in computed profits by using the costing methods.
Required:
Describe the validity of this statement, validating the reasons why you might agree or disagree with it.
Question 3: ABC Co. is in the procedure of deciding whether or not to accept a special order. The order will need 100 liters of liquid X.
ABC Ltd has 85 liters of liquid X in inventory however no longer produces the product which required liquid X. This could thus sell the 85 liters for Rs 2 per liter if it refuses the special order. The liquid was purchased three years ago at a price of Rs 8 per liter however its replacement cost is Rs 10 per liter.
Required: Find out the relevant cost of liquid X to comprise in the decision-making.