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Variable costing and Absorption Costing
Workings
Monthly Sales Workings (Drury, 227-229)
| July | August | September | October |
Units sold | 6000 | 10000 | 15000 | 11000 |
Selling price per unit ($ 138) | 138 | 138 | 138 | 138 |
Total sales revenue (Units * SP) | $828,000 | $1,380,000 | $2,070,000 | $1,518,000 |
Variable Expenses
Cost of goods sold per unit |
| Qty | cost per Qty | total cost | |
Direct material | 4 KGS | $10 | $40 |
Direct labour | 2 Hrs | $17 | $34 |
Manufacturing overhead | 8 Hrs | $7 | $56 |
Total cogs per unit | | | $130 |
Total units sold | July | August | September | October |
6000 | 10000 | 15000 | 11000 |
Total cost of sales (cog per unit * SP | $780,000 | $1,300,000 | $1,950,000 | $1,430,000 |
Marketing and Administrative Costs
sales | $828,000 | $1,380,000 | $2,070,000 | $1,518,000 |
Percentage of variable Admin and sales | 2% | 2% | 2% | 2% |
Total variable admin cost | $16,560 | $27,600 | $41,400 | $30,360 |
Total Variable Cost
Total variable admin cost | $16,560 | $27,600 | $41,400 | $30,360 |
Total cost of sales (cog per unit * sp | $780,000 | $1,300,000 | $1,950,000 | $1,430,000 |
Total Variable cost | $796,560 | $1,327,600 | $1,991,400 | $1,460,360 |
Contribution Margin
Total sales revenue (Units * SP) | $828,000 | $1,380,000 | $2,070,000 | $1,518,000 |
Total Variable cost | $796,560 | $1,327,600 | $1,991,400 | $1,460,360 |
Contribution Margin | $31,440 | $52,400 | $78,600 | $57,640 |
Fixed Cost per Unit
Budgeted production | 13,000 |
Budgeted fixed manufacturing overhead | 32500 |
Fixed Cost per unit | 2.5 |
Total Fixed Cost
Units sold | 6000 | 10000 | 15000 | 11000 |
Fixed cost per unit | 2.5 | 2.5 | 2.5 | 2.5 |
Total fixed manufacturing cost | 15000 | 25000 | 37500 | 27500 |
Fixed Admin and marketing cost | 25000 | 25000 | 25000 | 25000 |
Total fixed cost | 40000 | 50000 | 62500 | 52500 |
Net profit/ loss
| July | August | September | October |
Contribution Margin | $31,440 | $52,400 | $78,600 | $57,640 |
Total fixed | $40,000 | $50,000 | $62,500 | $52,500 |
Net profit | -$8,560 | $2,400 | $16,100 | $5,140 |
Net profit under the variable costing method
Profit Statement Using Absorption Costing |
For the Three Months to 30 September |
| July | August | September | October |
| $ | $ | $ | |
Sales | $828,000 | $1,380,000 | $2,070,000 | $1,518,000 |
| | | | |
Less: Variable Expense | | | | |
Cost of goods sold at cost | $780,000 | $1,300,000 | $1,950,000 | $1,430,000 |
Marketing and administrative | $16,560 | $27,600 | $41,400 | $30,360 |
Total Variable Expense | $796,560 | $1,327,600 | $1,991,400 | $1,460,360 |
Contribution Margin | $31,440 | $52,400 | $78,600 | $57,640 |
Less: Fixed Expense | | | | |
Manufacturing | 15000 | 25000 | 37500 | 27500 |
Marketing and administrative | 25000 | 25000 | 25000 | 25000 |
Total Fixed Expense | $40,000 | $50,000 | $62,500 | $52,500 |
Net Profit (Loss) before tax using absorption | -$8,560 | $2,400 | $16,100 | $5,140 |
Net profit/loss under the absorption costing method
Profit Statement using Variable Costing |
For the Three Months to 30 September |
| July | August | September | October |
| $ | $ | $ | |
Sales | $828,000 | $1,380,000 | $2,070,000 | $1,518,000 |
| | | | |
Less: Variable Expense | | | | |
Cost of goods sold at cost | $444,000 | $740,000 | $1,110,000 | $814,000 |
Marketing and administrative | $16,560 | $27,600 | $41,400 | $30,360 |
Total Variable Expense | $460,560 | $767,600 | $1,151,400 | $844,360 |
Contribution Margin | $367,440 | $612,400 | $918,600 | $673,640 |
Less: Fixed Expense | | | | |
Manufacturing | 15000 | 25000 | 37500 | 27500 |
Marketing and administrative | 25000 | 25000 | 25000 | 25000 |
Total Fixed Expense | $40,000 | $50,000 | $62,500 | $52,500 |
Net Profit (Loss) before tax | $327,440 | $562,400 | $856,100 | $621,140 |
Work cited
Drury, Colin. Cost and management accounting : an introduction. London: Thomson Learning, 2006. Print.