Advanced Cost Management Accounting Absorption Marginal Costing Cost

Advanced Cost & Management Accounting Absorption & Marginal Costing

Cost Elements Direct Material Direct Labor Variable Cost FOH Variable & Fixed Cost

Absorption Costing & Marginal Costing Particulars Direct Material Rs. 80 per unit Direct Labor Rs. 50 per unit Factory Overhead Variable FOH Fixed FOH Product Cost Fixed Cost (Period Expenses) Absorption Costing 100 units Marginal Costing 100 units 8, 000 5, 000 3, 000 2, 000 18, 000 16, 000 2, 000

Cost Per Unit Absorption Costing = 18, 000 / 100 = Rs 180 per unit Marginal Costing = 16, 000 / 100 = Rs 160 per unit

a – All units Sold b- No. of units sold No. of units in stock C- No. of units sold 80 20 100 110 Selling price Rs. 240 per unit

a) All Units Sold Absorption costing 24, 000 Marginal costing 24, 000 Sales (100 x 240) Less Product cost 100 x 180 (18, 000) 100 x 160 (16, 000) Gross profit 6, 000 Contribution margin Less Fixed cost 0 8, 000 (2000) Profit 6, 000

b) 80 units sold & 20 units in closing stock Absorption costing Sales 80 x 240 19, 200 Less Production cost 19, 200 100 x 180 = 18, 000 20 x 180 = (3600) 100 x 160 = 16, 000 20 x 160 = (3, 200) Gross Profit Less Fixed cost Profit Marginal costing (14, 400) (12, 800) 4, 800 Contribution Margin 6, 400 (2, 000) 4, 400

c) 110 units sold Absorption costing Sales 110 x 240 26, 400 Less Production cost 26, 400 10 x 180 = 18, 00 100 x 180= 18, 000 10 x 160 = 16, 00 100 x 160 =16, 000 Gross Profit Less Fixed cost Profit Marginal costing (19, 800) (17, 600) 6, 600 Contribution Margin 8, 800 (2, 000) 6, 800