Make a report to indicate differences of the two reporting

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Reference no: EM132595479

Doom Bhd manufactures and sells a single product. Cost data for the product are given below:

Variable costs per unit:

Direct materials RM 7

Direct labour RM 10

Variable manufacturing overhead RM 5

Variable selling and administrative overhead RM 3

Total variable cost per unit RM 25

Fixed costs per month:

Fixed manufacturing overhead RM315,000

Fixed selling and administrative overhead RM245,000

RM560,000

The product sells for RM60 per unit. Production and sales data for July and August, that is, the first two months of operations, follow:

Units produced Units sold

July 17,500 15,000

August 17,500 20,000

The company's Accounting Department has prepared an absorption costing income statement for July and August as presented below:

                                                                        July                         August

Sales                                                RM 900,000         RM 1,200,000

(-) Cost of goods sold                            (RM 600,000)        (RM 800,000)

Gross margin                                           RM 300,000           RM 400,000

(-) Selling and administrative expenses        (RM290,000)         (RM 305,000)

Net operating income                                    RM10,000                RM 95,000

Question 1: As a cost accountant, you would like to suggest that the company use variable costing in order to help the decision-making process. Make a report to indicate the differences of the two reporting income statements. Your report should consist of the income statement for variable costing and computation the unit product cost under absorption and variable costing.

Reference no: EM132595479

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