You are given the following budgets for period 1 (six months) and period 2 (six months):
Period 1 Period 2
Sales units 20 000 28 000
Production units 25 000 30 000
The following budgeted information applies to both periods:
Selling price per unit R6.80
Variable cost per unit R3.40
Fixed annual manufacturing overhead (period 1 and period 2) R110 000
Fixed annual manufacturing overheads are recovered at a fixed cost per unit based on the budget annual production units.
YOU ARE REQUIRED:
Calculate the absorption costing profits for period 1 and for period 2 and show the over or under absorption of fixed manufacturing costs in each period;