Question:
A company is having a production capacity of 1,00,000 units per year. The normal capacity utilization is reckoned at 80%. The standard variable production costs are Rs. 15 per unit and fixed production costs are Rs. 3,20,000 per year. The variable selling costs are Rs. 4 per unit and fixed selling costs are Rs. 1,60,000 per year. The unit selling price is Rs. 30. During the year that ended on 31 March 2009, 75,000 units were produced and 70,000 units were sold. The closing inventory on 31 March 2009 was 10,000 units. The actual variable production cost for the year was Rs. 75,000 which was higher than the standard.
Prepare an income statement under: (i) Absorption Costing technique; and (ii) Variable Costing technique.