Q1. Give a numerical example for Variable Costing Contribution Format Income Statement that is used for the internal decision-making and compare with the traditional income statement prepared by absorption costing that is used for the external reporting. Prepare the two income statements assuming the following (2.5 marks)
There is no inventory.
There is beginning inventory.
There is end of period inventory
Explain and comment on the reasons for differences in the results
Q2. Define the master budget and use your own figures to prepare the following quarter budgets: (2.5 marks)
Production budget with ending inventory.
Raw material budget with ending inventory.
Direct labor budget
Manufacturing overhead budget.
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