(SOLVED) Feeling Fab Ltd produces frozen yoghurt a low fat dairy dessert


Question Description:

$20

Feeling Fab Ltd produces frozen yoghurt. a low-fat dairy dessert. The product is sold in five-litre containers and had the following price and variable costs per unit for the current year which ended on 30 June:
Sales price………………………….$15.00
Direct material………………………..5.00
Direct labour………………………….2.00
Variable overhead…………………….3.00
Budgeted fixed overhead for the current year was $300 000, which was equal to actual fixed overhead. Actual production was 150 000 five-litre containers, which was equal to the budgeted level of production, but only 125 000 containers were sold. Feeling Fab incurred the following selling and administrative expenses:
Fixed……………………………………$50,000
Variable……………………$1 per container sold
Required:
1. Calculate the cost per unit under variable and absorption costing.
2. Prepare income statements for the current year using:
(a) Absorption costing.
(b) Variable costing.
3. Reconcile the profit reported under the two methods by listing the two key areas where the statements differ.

Answer

$20