Variable costing and Absorption Costing
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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.
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