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AbsVarCost_LucasBenni_Sol - ABSORPTION AND VARIABLE COSTING...

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ABSORPTION AND VARIABLE COSTING Compiled by Colin C Smith 2013 LUCAS AND BENNI - SUGGESTED SOLUTION a. Using the Hi-Low method: Production - Year 2 2,500 pairs Manufacturing Overheads - Year 2 R 350,000 Production - Year 3 1,500 pairs Manufacturing Overheads - Year 3 R 330,000 Change 1,000 pairs Change R 20,000 Variable Manufacturing Overheads = R 20 000/ 1000 = R20 per pair Sales - Year 2 2,300 pairs Sales & Admin. Expenses – Year 2 R 123,000 Sales – Year 3 1,600 pairs Sales & Admin. Expenses – Year 3 R 116,000 Change 700 pairs Change R 7,000 Variable Sales & Admin. Expenses = R 7 000/700 = R10 per pair Variable Man. O/Heads Year 1 R20 x 2000 = R 40 000 Year 2 R20 x 2500 = R 50 000 Year 3 R20 x 1500 = R 30 000 Variable Sales & Admin. Year 1 R10 x 2000 = R 20 000 Year 2 R10 x 2300 = R 23 000 Year 3 R10 x 1600 = R 16 000 Fixed Manufac. O/H’s Year 1 R 340 000 – R 40 000 = R 300 000 Year 2 R 350 000 – R 50 000 = R 300 000 Year 3 R 330 000 – R 30 000 = R 300 000 Fixed sales & Admin. Year 1 R 120 000 – R 20 000 = R 100 000 Year 2 R 123 000 – R 23 000 = R 100 000 Year 3 R 116 000 – R 16 000 = R 100 000 b. Variable Costing Income Statement: R R Sales R 560 000 Less Variable Cost of Goods Sold:
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