question archive A company produces and sells a single product, the standard unit cost details of which are as follows: Direct material 2 kilos x $4
A company produces and sells a single product, the standard unit cost details of which are as follows: Direct material 2 kilos x $4
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A company produces and sells a single product, the standard unit cost details of which are as follows:
Direct material 2 kilos x $4.5 per kilo
Direct labour 3 hours x $5 per hour
Variable overhead 3 hours x $3 per hour
The total fixed overhead is budgeted at $90,000 per month and is absorbed on a rate per unit basis.
The budgeted output per month is 15,000 units.
The product has a standard selling price of $50 per unit.
The following activity took place during January and February:
January February
Sales 14,000 units 16,000 units
Production 16,000 units 14,500 units
There is an opening stock on 1 January of 3,000 units.
Required:
(a) Calculate the standard cost and profit for one unit of output.
(b) Prepare profit statements for each month using:
(i) marginal costing
(2) absorption costing
(c) Prepare a statement reconciling the marginal with the absorption profit for the month.
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Answer:
Sales =14000 For January and 16000 For February
Production units = 16000units january 14500 units February
Calculation of Closing Stock units
| Particulars | January | February |
| Opening Stock | 3000 | 5000 |
| Production | 16000 | 14500 |
| Sales | 14000 | 16000 |
| Closing Stock | 5000 | 3500 |
a) Calculation of total Cost and Profit for One Unit of Out Put
Fixed Overheads are Obsorbed Based On Budgeted Out put = 15000
So Fixed Overhead Per unit = 90000/15000 =6
| Particulars | Amount |
| Sale price | 50 |
| Less: | |
| Varible Cost Per unit | |
| Direct Material | 9 |
| Direct Labour | 15 |
| Varible Overheadss | 9 |
| Fixed Overheads | 6 |
| Total Cost per unit | 39 |
| Profit Per unit | 11 |
Standard Cost per unit =39
Standard Profit Per unit =11
b)
Profit Statements under Marginal And Absorption Costing Methods
| Calculation of Marginal Cost & Profit | ||
| Particulars | january | February |
| Sales | 14000 | 16000 |
| Selling Price Per Unit | 50 | 50 |
| Sales Total | 700000 | 800000 |
| Varible Cost per unit | ||
| Direct Materials | 9 | 9 |
| Direct Labour | 15 | 15 |
| Varible Overheadss | 9 | 9 |
| Total Varible Cost Per unit | 33 | 33 |
| Contribution Per unit | 17 | 17 |
| Total Contribution | 238000 | 272000 |
| Less: | ||
| Fixed Cost | 90000 | 90000 |
| Marginal Profit | 148000 | 182000 |
Calculation of total Cost and Profit under Absorption Costing Methods
| Particulars | january | February |
| Sales | 14000 | 16000 |
| Selling Price Per Unit | 50 | 50 |
| Sales Total | 700000 | 800000 |
| Total Manufacturing Cost | ||
| Toal Varible cost Perunit | 33 | 33 |
| Total Varible Cost | 528000 | 478500 |
| Fixed Manufacturing Cost | 90000 | 90000 |
| Total Manufacturing Cost | 618000 | 568500 |
| Add Opening Stock | 115875 | 193125 |
| Less Closing Stock | 193125 | 137224.14 |
| Total Cost Of Production | 540750 | 624400.86 |
| Absorption Profit(Sales - Total Cost) | 159250 | 175599.14 |
c) Reconcilation Between Marginal Costing and Absorption Costing
| Statement Of Reconcilation | ||
| Particulars | january | February |
| Profit as Per Marginal Costing | 148000 | 182000 |
| Less : Increase In Varible Cost As Per Absorption cost | 66000 | |
| Add : Decrese in Varible Cost as Per Absorption Costing | 49500 | |
| Add : Value Of Closing Stock in Absorption Costing | 193125 | 137224.1379 |
| Less: Value of Opening Stock | 115875 | 193125 |
| Profit As Per Absorption Costing | 159250 | 175599.14 |
