Playtime Ltd produces jigsaws for sale in model shops. The following information relates to the sales and costs of producing the jigsaws.
Selling price per unit is £20
Variable cost per unit is £10
Fixed costs of the period are £800
Volumes of production and sales are as follows for periods 1, 2 and 3.
Period 1 Period 2 Period 3
unitsunitsunits
Produced 250 200 180
Sold 210 210 210
Held in stock at end of period 40 30 nil
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Part 1Dening, reporting and managing costs
Required
(a) Using absorption costing, what is the profit of Period 2?
(b) Using marginal costing what is the profit of Period 2?
(c) Compare the profit of Period 1 under absorption costing with that calculated under marginal costing and explain the difference.
(d) Using absorption costing, calculate the value of closing stock at the end of Period 1. (e) Using marginal costing, calculate the value of closing stock at the end of Period 1.