(a) Total fixed indirect manufacturing cost is £92,000 per year.

(b) Direct labour costs over each of the three years were £10 per unit.

(c) Direct material costs over each of the three years were £13 per unit.

(d) Variable expenses which vary in direct ratio to production were £7 per unit.

(e) Sales were: Year 1: 2,600 units; Year 2: 3,500 units; Year 3: 3,200 units. The selling price remained constant at £85 per unit.

(f) Production is at the rate of: Year 1: 3,500 units; Year 2: 3,800 units; Year 3: 3,650 units.

(g) Other overheads are as follows:

• Distribution expenses £24,000 for each year
• Administrative expenses £89,000 for each year
(h) Interest expense: Year 1: £1,100; Year 2: £1,000; Year 3: £nil

(i) The company’s applicable corporation tax rate is 19%

 

Calculate cost using appropriate techniques of cost analysis to prepare an income statement using marginal and absorption cost.

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