LS2468: Raja Hansa Enterprises Ltd. has a production capacity of 2,00,000 units per year. Normal capacity is at an average of 90%. Standard variable production cost is Rs.11 per unit. The fixed cost Rs.3,60,000 per year. Variable selling cost is Rs.3 per unit and fixed selling cost is Rs.27000 per year. The unit selling price is Rs.20. In the year just ended the production was 1,60,000 units and the sales were 1,50,000 units. The closing inventory was 20,000 units. The actual variable production cost for the year was Rs.35,000 higher than the standard cost.

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Question: Raja Hansa Enterprises Ltd. has a production capacity of 2,00,000 units per year. Normal capacity is at an average of 90%. Standard variable production cost is Rs.11 per unit. The fixed cost Rs.3,60,000 per year. Variable selling cost is Rs.3 per unit and fixed selling cost is Rs.27000 per year. The unit selling price is Rs.20. In the year just ended the production was 1,60,000 units and the sales were 1,50,000 units. The closing inventory was 20,000 units. The actual variable production cost for the year was Rs.35,000 higher than the standard cost.

(i)Calculate the profit for the year by absorption costing method and by marginal costing method.

(ii) Explain the difference in profit, if any, calculated according to the above methods.

 


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