Problem:
The Baked Bean Butty Company has in the past used absorption costing in valuing stocks.
The company’s new accountant feels that a marginal costing approach would be preferable. The following figures have been made available to you for the years ended 30 April 1999 and 30 April and 30 April 2000.
Year ended 30 April 1999 30 April 2000
$ $
Unit Costs
Direct Materials 0.17 0.19
Direct Labour 0.12 0.14
Variable Overheads 0.08 0.09
Selling Price per Unit 0.90 0.95
Fixed Factory Overhead 29,900 31,850
Sales Units 220,000 240,000
Production Units 230.000 245,000
Opening Stock on 1 May 1998 was 8000 units at a total cost of $0.50 per unit.
Draw up the Manufacturing and Trading accounts for the years ended 30 April 1999 and 30 April 2000, using
1. Absorption Costing
2. Marginal Costing