Unformatted text preview: penses and Fixed Sales and Admin. Expenses for each of years 1, 2
and 3. You must show all your workings. (8 marks) Lucas and Benni realise that the Income Statements drawn up by Freddy provide them with very little
useful information. They have heard about Variable Costing, and ask you to draw up a Variable Costing
Income Statement for Year 3 only. They wish to see details of the Cost of Goods Sold calculation, as well
as the Contribution figure, shown clearly in the Income Statement. (9 marks) Concerned by the loss in Year 3, Lucas and Benni ask you to calculate how many pairs of boots they
would have had to sell to break even in this year? (4 marks) Lucas and Benni have heard that Absorption Costing can produce different results from Variable Costing.
They ask you to explain briefly the difference between Variable Costing and Absorption Costing, and why
profits under Absorption Costing will be higher than under Variable Costing if production units exceed
sales units for the year? (Assume...
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