July 2,000 (number of units)
June 2,000 July 3,000 (number of units)
The fixed manufacturing cost is $18,000 per month and variable manufacturing cost is $5 per unit. There is also a monthly fixed non-manufacturing cost (marketing and administration) of $5,000. There was no work in progress at the end of either June or July.
a) Calculate operating profit for each month, first using a marginal costing approach and then a full (absorption) costing approach. (10 marks)
b) Explain the reason behind change in profit under variable and absorption costing. (2 marks)