description 2014 absorption costing variable costing direct raw material cost 50
ID: 2500507 • Letter: D
Question
description 2014
absorption costing variable costing
direct raw material cost 50.000 50.000
direct labor cost 30.000 30.000
variable mfg. overhead cost 40.000 40.000
fixed manufacturing overhead cost 13.333
total product cost 133.333 120.000
selling price 160.000 144.000
number of units produced = 1500
number of unit sold = 2000
what is the income statment for absorption costing and variable costing
and the Reconciliation
Explanation / Answer
In the question, number of units sold is mentioned as 2,000 units, which is higher of units produced of 1,500 units. Furthermore nothing is mentioned about opening stock. Hence I assumed units sold might be 1,200 units. The present figure 2,000 units might have been mentioned by mistake.
Hence on the assumption of units sold 1,200 units following calculations are made.
A) Absorption costing.
b) Variable costing & reconciliation of profit;
Income under Absorption Costing Particulars Units Cost p.u. Amount($) Amount ($) (A) Sales at $160 per unit 1200 192,000 (B) Production cost 1500 i) Direct Raw material 1500 50.00 75,000 ii) Direct Labour Cost 1500 30.00 45,000 iii) Variable Mfg. overhead cost 1500 40.0 60,000 iv) Fixed Mfg. overhead cost 1500 13.333 20,000 Total for 1500 units 133.333 200,000 (C ) Closing stock 300 133.333 40,000 (D) Cost of sales (B - C) 1200 160,000 (E) Gross profit ( A - D) 32,000b) Variable costing & reconciliation of profit;
Income under Variable Costing Method Particulars Units Cost p.u. Amount($) Amount ($) (A) Sales at $144 per unit 1200 172,800 (B) Production cost 1500 i) Direct Raw material 1500 50.00 75,000 ii) Direct Labour Cost 1500 30.00 45,000 iii) Variable Mfg. overhead cost 1500 40.0 60,000 Total for 1500 units 120.00 180,000 (C ) Closing stock 300 120.00 36,000 (D) Production Cost of sales (B - C) 1200 144000 (E) Fixed Manufacturing Overhead cost 20000 (F) Cost of sales( D + E) 1200 164,000 (G) Gross margin (A - G) 8,800 Reconciliation: Particulars Units Amount ($) Profit as per variable costing method 1200 8,800 Add: Difference in selling price (160-144) 1200 19,200 Add:Fixed Manufacturing overhead absorbed in closing stock at 13.333 per unit under abosrption costing 300 4000 Total profit (Total of all above) 32,000 Profit under absorption costing 32,000Related Questions
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