Homework Answers
(a) Absorption costing per unit = Direct Material per unit+Direct Labour per unit+variable manufacturing OH per unit+(Fixed Manufacturing cost/total units manufactured)
Here's the table for easy understanding:
| Description | Reference | No. of units | Price per unit | Total |
| Total Manufactured | (A) | 1200 | ||
| Total Sold | (B) | 1000 | ||
| Selling Price | ( C) | 1,500.00 | ||
| Direct Material | (D) | 300.00 | ||
| Direct Labour | ( E) | 200.00 | ||
| Variable Manufacturing Cost | ( F) | 250.00 | ||
| Variable Selling and administrative cost | (G) | 100.00 | ||
| Fixed Manufacturing Cost (Total Exp/Units Manufactured) | (H)=400000/(A) | 333.33 | 400,000.00 | |
| Fixed Selling and administrative cost (total Exp/Units manufactured) | (I) = 100000/(A) | 83.33 | 100,000.00 | |
| ABSORPTION COSTING PER UNIT | (F) = (D)+( E)+(F)+(H) | 1,083.33 |
(b) Breakeven quantity = Total Fixed Cost divided by Contribution Margin per unit
Contribution Margin per unit = Revenue per unit less Total variable cost per unit
In this case, Revenue per unit = P1500
Total Variable cost per unit = P300+P200+P250+P100 = P850
Contribution margin per unit = P1500 less P850 = P650
Break even Point = (400000+100000) divided by P650 = 770 units (rounded off to nearest value)
(c) Income statement as per variable costing method:
| Income Statement as of 30th Sep 2015 as per Variable costing Method | ||||
| Description | Reference | Per unit cost | Total | Final Total |
| Revenue | ( B)*( C) | 1,500 | 1,500,000 | 1,500,000 |
| Less: Variable OH | ||||
| Direct Material | (D) | 300 | 360,000 | |
| Direct Labour | ( E) | 200 | 240,000 | |
| Variable Manufacturing Cost | ( F) | 250 | 300,000 | |
| Variable Selling and administrative cost | (G) | 100 | 120,000 | |
| 1,020,000 | ||||
| Contribution Margin | 480,000 | |||
| Less: Fixed OH | ||||
| Fixed Manufacturing Cost (Total Exp/Units Manufactured) | (H) | 400,000 | ||
| Fixed Selling and administrative cost (total Exp/Units manufactured) | (I) | 100,000 | ||
| 500,000 | ||||
| Net Operating Income / (Loss) |
(20,000) |
|||
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