Question

Question # 2 Following data relates to Shehla Sister Ltd engaged in production and marketing a computer component: MARGINAL AND ABSORPTION COSTING

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Answer 1

Unit product cost under Absorbtion costing and Variable costing :: Absorbtion Particulars Costing Variable cost 250.00 Fixed factory overhead 50.00 Unit product cost 300.00 Variable Costing 250.00 250.00 For August 1998 5,000,000 Determination of Net Income under Variable costing system: For July Particulars 1998 Sales @ 500 per unit 2,500,000 Less : - Variable cost of goods sold Beginning inventory Add: Variable cost of goods sold @ 250 per unit produced 2,625,000 Less: Ending inventory (5500-250), (500-250) 1,375,000 Variable cost of goods sold 1,250,000 Contribution Margin 1,250,000 Less :- Fixed expenses Fixed manufacturing overhead @ 50 per unit produced 525,000 Administrative overhead 130,000 Marketing overhead 120,000 Total Fixed expenses 775,000 Income from Operations 475,000 1,375,000 1,250,000 125,000 2,500,000 2,500,000 250,000 130,000 120,000 500,000 2,000,000 For August 1998 5,000,000 Determination of Net Income under Absorbtion costing system: For July Cost of goods sold 1998 Sales 2,500,000 Less: Cost of goods sold Beginning inventory Add: Cost of goods manufactured @ 300 per unit produced 3,150,000 Goods available for sales 3,150,000 Less: Ending inventory (5500*300), (500*300) 1,650,000 Cost of goods sold 1,500,000 Gross margin 1,000,000 Less: Selling and Admin expenses Administrative overhead 130,000 Marketing overhead 120,000 Total Fixed expenses 250,000 Income from Operations 750,000 1,650,000 1,500,000 3,150,000 150,000 3,000,000 2,000,000 130,000 120,000 250,000 1,750,000