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  • T7 Assignment 2

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    The document compares absorption costing and marginal costing for a company, Product X, for the months of January and February. Absorption costing results in a January profit of $17,300 and February profit of $30,800 for a total profit of $48,100. Marginal costing also results in a total profit of $48,100, with January profit of $15,500 and February profit of $32,600. The conclusion is that when there is no difference in closing stock, the profits under absorption costing and marginal costing will be the same.

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    The document compares absorption costing and marginal costing for a company, Product X, for the months of January and February. Absorption costing results in a January profit of $17,300 and February profit of $30,800 for a total profit of $48,100. Marginal costing also results in a total profit of $48,100, with January profit of $15,500 and February profit of $32,600. The conclusion is that when there is no difference in closing stock, the profits under absorption costing and marginal costing will be the same.

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    Download as DOC, PDF, TXT or read online from Scribd
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    15 views3 pages

    T7 Assignment 2

    Uploaded by

    akhalil_14u
    The document compares absorption costing and marginal costing for a company, Product X, for the months of January and February. Absorption costing results in a January profit of $17,300 and February profit of $30,800 for a total profit of $48,100. Marginal costing also results in a total profit of $48,100, with January profit of $15,500 and February profit of $32,600. The conclusion is that when there is no difference in closing stock, the profits under absorption costing and marginal costing will be the same.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
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    of 3

    Abdul Khalil

    CAT Setion ‘A’


    T 7 Assignment 9th July 2010

    Product = X
    ABC Ltd Comapny
    Absorption Costing For The Month Of January:
    Working Area:
    Solution: W-1:-
    $ OH’s Absorbed= Budted Fix Cost xActual actvty
    Sales (40 x 1500) 60000 Budgted Activity
    Less) Cost Of Sales:
    Direct Material (8 x 1800) 14400 OH’s Absorbed =12000 x 3600 = 10800
    Direct Labour (10 x 1800 ) 18000 4000
    Variable Production OH’s (3x1800) 5400 W-2:-
    Fixed OH’s Absorbed(W-1) 10800 Closing Stock = 300 units x (8+10+3+6) = 8100
    Less)Closing Stock (W-2) (8100) __(40500)___
    W-3:-
    Gross Profit 19500 Under Absorbed OH’s = 11500-10800 = 700
    Less)
    Under absorbed OH’s (W-3) ___(700)____
    Profit 18800
    Less)
    Variable Seling Cost (1x1500) (1500)
    Net profit 17300

    Product = X
    ABC Ltd Comapny
    Marginal Costing For The Month Of January:
    Working Area:
    Solution: W-1:-
    $ Closing Stock = 300 units x (8+10+3) =6300
    Sales (40 x 1500) 60000
    Less) Cost Of Sales:
    Direct Material (8 x 1800) 14400
    Direct Labour (10 x 1800) 18000
    Var. Production OH’s(3x1800) 5400
    Less)Closing Stock (W-1) (6300) (31500)

    Gross Contb 28500


    Less)
    Fixed Cost (11500)
    Var Seling Exp (1x1500) (1500)
    Net Profit 15500

    Page 01
    Product = X
    ABC Ltd Comapny
    Absorption Costing For The Month Of Februray:
    Working Area:
    Solution: W-1:-
    $ OH’s Absorbed= Budted Fix Cost xActual actvty
    Sales (40 x 2500) 100000 Budgted Activity
    Less) Cost Of Sales:
    Opening Stock 8100 OH’s Absorbed =12000 x 4400 = 13200
    Direct Material (8 x 2200) 17600 4000
    Direct Labour (10 x 2200 ) 22000 W-2:-
    Variable Production OH’s (3x2200) 6600 Closing Stock = 300+2200-2500 = NiL
    Fixed OH’s Absorbed(W-1) 13200
    Less)Closing Stock (W-2) (NiL) __(67500)___ W-3:-
    Over Absorbed OH’s = 13200-12400 =800
    Gross Profit 32500
    Add)
    Over absorbed OH’s (W-3) ___ 800____
    Profit 33300
    Less)
    Variable Seling Cost (1x2500) (2500)
    Net profit 30800

    Product = X
    ABC Ltd Comapny
    Marginal Costing For The Month Of Februray:
    Working Area:
    Solution: W-1:-
    $ Closing Stock = 2500-300-2200=NiL
    Sales (40 x 2500) 100000
    Less) Cost Of Sales:
    Opening Stock 6300
    Direct Material (8 x 2200) 17600
    Direct Labour (10 x 2200 ) 22000
    Variable Production OH’s (3x2200) 6600
    Less)Closing Stock (W-1) (NiL) __(52500)___

    Gross Contb 47500


    Less)
    Fixed Cost (12400)
    Variable Seling Cost (1x2500) (2500)
    Net profit 32600

    Page 02
    Conclusion:

    Costing Method January February Total Profit

    Absorption Costing Profit=17300 Profit=30800 Total= 48100

    Marginal Costing Profit=15500 Profit=32600 Total=48100

    Note:
    When there is no Closing stock difference then:

    Marginal Costing Profit= Absorption Costing Profit

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