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 Marginal and Absorption
03-01-2011, 09:43 AM
Post: #1
 abitrini Junior Member Posts: 3 Joined: Mar 2011 Reputation: 0
Marginal and Absorption
i got a question for home work and i dont understand the topic very well and i would like some assistance.

Question - Two left feet Ltd. manufactures a single product the Claud. the following figures relates to the Claud for a 1year period.
Activity level at 100%
Sales and Production units 800
Sales \$16000
Production costVariable 6400
Fixed cost 1600
Sales & Distribution- Variable 3200
Fixed 2400
the ;eve; of activity is 800 units fixed costs are incurred eventty throughout the year. the actual fixed asset are the same as budgeted.

there were no stock of Claud at the beginning of the year. the 1st quarter 200 units were produced and 160 were sold.
1. Calculate the Fixed Production costs absorbed in the 1st quarter if absorption costing is used.
2. Calculate Profit using Absorption and Marginal costing
03-01-2011, 05:49 PM
Post: #2
 danishayub_76 Member Posts: 164 Joined: Jan 2007 Reputation: 0

Absorptoin Costing
Sales 160x20 3200
Less Cost of Goods Sold
200-40=160 x 10 1600
Gross Profit 1600
Less Selling exps
Fixed (quarterly) 600
Variable 4x160 640
Net Profit 360

Marginal Costing
Sales; 3200
Less cost of goods sold
160x8 1280
Contribution margin 1920
Less Selling exps 160x4
Fixed quarterly 600
Fixed production cost 400
Net PRofit 280

Difference of Net profits under absorption and marginal costing is Rs.80 which is due to (40 units closing stock X 2 per unit)

So 1)the Fixed Production costs absorbed in the 1st quarter is Rs.320 (160x2)

Calculation for Unit Costs

Absorption Costing
Production cost 6400/800=8
Fixed prod. cost 1600/800=2
Total per unit cost Rs.10/-

Marginal Costing
total per unit cost as per absorption costing 10
less Fixed prod. cost 2
Marginal Costing per unit 8/-

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by abitrini</i>
<br />i got a question for home work and i dont understand the topic very well and i would like some assistance.

Question - Two left feet Ltd. manufactures a single product the Claud. the following figures relates to the Claud for a 1year period.
Activity level at 100%
Sales and Production units 800
Sales \$16000
Production costVariable 6400
Fixed cost 1600
Sales & Distribution- Variable 3200
Fixed 2400
the ;eve; of activity is 800 units fixed costs are incurred eventty throughout the year. the actual fixed asset are the same as budgeted.

there were no stock of Claud at the beginning of the year. the 1st quarter 200 units were produced and 160 were sold.
1. Calculate the Fixed Production costs absorbed in the 1st quarter if absorption costing is used.
2. Calculate Profit using Absorption and Marginal costing
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
03-02-2011, 05:58 AM
Post: #3
 abitrini Junior Member Posts: 3 Joined: Mar 2011 Reputation: 0

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by danishayub_76</i>
<br />Absorptoin Costing
Sales 160x20 3200
Less Cost of Goods Sold
200-40=160 x 10 1600
Gross Profit 1600
Less Selling exps
Fixed (quarterly) 600
Variable 4x160 640
Net Profit 360

Marginal Costing
Sales; 3200
Less cost of goods sold
160x8 1280
Contribution margin 1920
Less Selling exps 160x4
Fixed quarterly 600
Fixed production cost 400
Net PRofit 280

Difference of Net profits under absorption and marginal costing is Rs.80 which is due to (40 units closing stock X 2 per unit)

So 1)the Fixed Production costs absorbed in the 1st quarter is Rs.320 (160x2)

Calculation for Unit Costs

Absorption Costing
Production cost 6400/800=8
Fixed prod. cost 1600/800=2
Total per unit cost Rs.10/-

Marginal Costing
total per unit cost as per absorption costing 10
less Fixed prod. cost 2
Marginal Costing per unit 8/-

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by abitrini</i>
<br />i got a question for home work and i dont understand the topic very well and i would like some assistance.

Question - Two left feet Ltd. manufactures a single product the Claud. the following figures relates to the Claud for a 1year period.
Activity level at 100%
Sales and Production units 800
Sales \$16000
Production costVariable 6400
Fixed cost 1600
Sales & Distribution- Variable 3200
Fixed 2400
the ;eve; of activity is 800 units fixed costs are incurred eventty throughout the year. the actual fixed asset are the same as budgeted.

there were no stock of Claud at the beginning of the year. the 1st quarter 200 units were produced and 160 were sold.
1. Calculate the Fixed Production costs absorbed in the 1st quarter if absorption costing is used.
2. Calculate Profit using Absorption and Marginal costing
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
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