Answer Happy

Question 2 Everfood Ltd. manufactures healthy food products. Each of it sells at £41. Every month, the fixed manufacturing overhead allocation rate are computed based on the planned number of meals to be produced that month. The following are the data from Everfood's year 2021 business: Year 2021 Units produced Units sold Variable manufacturing cost per product Variable non-manufacturing cost per product Total fixed manufacturing overhead Total fixed non-manufacturing overhead 250,000 170,000 £19 £13 £750,000 £420,000 Required: (a) Prepare the income statement for year 2021 using absorption costing and variable costing (20 marks) LE (b) Explain the reasons for the difference in operating income between absorption costing and variable costing. (10 marks) (c) Identify and explain the arguments for absorption costing. (10 marks)