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F2.Homework- Chapter 9&10 Part 1 Pinafore Ltd manufactures and sells a single product. The budgeted profit statement for this month, which has been prepared using marginal costing principles, is as follows: £’000 £’000 Sales (24,000 units) 864 Less Variable production cost of sales: Less Opening stock (3,000 units) 169 Less Production (22,000 units) 506 Less Closing stock (1,000 units) 1 (23) –––– (552) –––– 312 Less Variable selling cost 1(60) –––– Contribution 252 Less Fixed overhead costs: Less Production 125 Less Selling and administration 1 40 –––– (165) –––– Net profit 1 87 –––– The normal monthly level of production is 25,000 units and stocks are valued at standard cost. Required: (a) Prepare in full a budgeted profit statement for this month using absorption costing principles. Assume that fixed production overhead costs are absorbed using the normal level of activity. (b) Prepare a statement that reconciles the net profit calculated in (a) with the net profit using marginal costing. (c) Which of the two costing principles (absorption or marginal) is more relevant for short-run decision-making, and why? Part 2 Oliphant Company designs industrial prototypes for outside companies. Budgeted overhead for the year was $476,000, and budgeted direct labor hours were 13,600. The average wage rate for direct labor is expected to be $25 per hour. During June, Oliphant Company worked on four jobs. Data relating to these four jobs follow: Overhead is assigned as a percentage of direct labor cost. During June, Jobs 39 and 40 1 were completed; Job 39 was sold at 120 percent of cost. (Oliphmt had originally developed Job 40 to order for a customer; however, that customer was near bankruptcy and the chance of Oliphant being paid was growing dimmer. Oliphant decided to hold Job 40 in inventory while the customer worked out its financial difficulties. Job 40 is the only job in Finished Goods Inventory.) Jobs 41 and 42 remain unfinished at the end of the month. Required: 1. Calculate the overhead rate based on direct labor cost. 2. Prepare Job Accounts for all jobs in process during June. 3. Calculate the balance in Work in Process as of June 30. 4. Calculate the balance in Finished Goods as of June 30. 5. Calculate the cost of goods sold for June. 6. Calculate the price charged for Job 39. 2