Answer Happy

Lescorp Company manufactures and sell a unique diesel engine
part. The company’s plant is highly automated with low variable and
high fixed manufacturing costs. The company accounts for inventory
on a first-in, first-out basis (FIFO).
The profit before tax for the recent financial year ended 31
March 2021, prepared on the absorption costing basis, is presented
below:
Actual
2021
R
Sales
432 000
Cost of sales
-338 000
Opening inventory
0
Total manufacturing costs
370 000
Less closing inventory
-32 000
Gross Profit
94 000
Less total administrative and selling expenses
-66 000
Net profit before tax
28 000
Actual information for the 2021 financial year ended 31 March
2021, as well as the information for the 2022 financial year, is
provided below:
Actual
Forecast
Description
2021
2022
Selling price per unit
R12.00
R13.30
Sales in units
36
000
42
000
Normal production in units
50
000
50
000
Actual production in units
40
000
55
000
Total variable manufacturing costs per unit
R3.00
R3.60
Total fixed manufacturing costs
R250 000
R302 500
Variable selling and administration costs per unit
R1.00
R1.00
Total fixed selling and administration costs
30 000
30 000
REQUIRED
You may IGNORE any TAX implications
Sub-Total
Total
1.
Calculate the profit before tax as per variable
costing principles of The Lescorp Company for the year ended 31
March 2021.
(Hint: You need to prepare a reconciliation from the
absorption costing profit to the variable costing profit)
6
6
2.
Prepare the forecasted income statement of The
Lescorp Company for the year ended 31 March 2022
as per variable costing principles.
8
8
3.
Calculate the profit before tax as per
absorption costing principles of The Lescorp
Company for the year ended 31 March 2022.
(Hint: You need to prepare a reconciliation from the
variable costing profit to the absorption costing profit)
6
6
Total Marks
20