Neco Model Questions Vol1 2019 Financial Accounting Question 31

A manufacturing firm provides the following data for the month: Opening raw material inventory \(\N50,000\), purchases of raw material \(\N200,000\), closing raw material inventory \(\N30,000\). Opening work‑in‑process (WIP) inventory \(\N40,000\), closing WIP \(\N20,000\). Direct labour cost \(\N120,000\). Manufacturing overhead is applied at \(\N500\) per machine hour; total machine hours for the period are 300. Twenty percent of the overhead is fixed and must be treated as a period cost under variable costing. The firm produced 500 units and sold 480 units at a selling price of \(\N1,200\) each. Sixty percent of customers pay cash and receive a 5 % cash discount if payment is made within 10 days; the remaining 40 % pay on credit. Calculate (a) the profit under absorption costing, (b) the profit under variable costing, and (c) the difference between the two profits.