Fundamental of Cost Accounting
Bennett’s Manufacturing started business on 1 JUNE 2016, and incurred the following costs during its first two years.
Year ending 31 March
2016
2017
$
$
Direct materials
120,000
80,900
Direct labour
80,000
55,000
Variable overheads
50,000
35,000
Fixed costs
60,000
50,600
Production each year (units) 20,000 and 16,000
Sales each year (units) 17,000 and 16,000
Selling price for 2016 $50
Selling price for 2017 $ 60
Required:
A. Prepare a statement showing the gross profit for each of the three years if the company used:
• The marginal costing approach to valuing inventory; (15 marks)
• The absorption costing approach to valuing inventory. (15 marks)
