Absorption cost

Cloud Ltd., produces 8,000 units of product Z during the year ended 31/12/2018. 6,000 of these units were sold at sh6 per unit. The production costs were as follows:

Direct Materialssh0.50 per unit
Direct Labour sh0.80 per unit
Variable Overhead sh0.50 per unit
Fixed Overhead Cost for the year sh3,000

You are required to:
(a) Prepare income statements under Marginal and Absorption costing principles. (12 Marks)

Sample Solution

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