Question

o5) TIL, a publidhy listed company, is in the business of Fatbric" manufacturing, lin cardert produce 1MT of fabric TIL's consumption of costs are as follow Ouantoy used per unit Unit pmce 500_ Direct Labour Direct Material Yarn 5.0 400 Dye Chemical (As a % of other DM components) Variable Manufacturing overhead (As a % of DM and DL.) Fixed Manufacturing overhead Fixed other admin related costs (As a % of Sales) 20 0%- 10.0%- 15.0% price per kg of fabric 4.5000 80% of the production is expected to be sold during the year Prepare profit/loss statement using both the a) Marginal and b) Absorption costing method

Answer 1

Computation of Profit & Loss as per Absorption costing
No. of Unit Sold (1000 KGX 80%)		800
Revenue (800X 4500) (a)		$3,600,000
Less: Cost of Goods Sold
Direct Material
Yarn (20X 800X$30)	$480,000
Dye (5X800X40)	$160,000
Chemical (20% X 640000)	$128,000	$768,000
Direct Labour ( 800X 10X$50)		$400,000
Variable Manufacturing OH (768000+400000)*10%		$116,800
Fixed Manufacrtuing OH (1500000/1000*800)		$1,200,000
Fixed Other Admin Cost (3600000*15%)		$540,000
Total Cost of godds Sold (b)		$3,024,800
Net Profit		$575,200
Computation of Profit & Loss as per Marginal costing
No. of Unit Sold (1000 KGX 80%)		800
Revenue (800X 4500) (a)		$3,600,000
Less: Variable Cost of Goods Sold
Direct Material
Yarn (20X 800X$30)	480000
Dye (5X800X40)	160000
Chemical (20% X 640000)	128000	$768,000
Direct Labour ( 800X 10X$50)		$400,000
Variable Manufacturing OH (768000+400000)*10%		$116,800
Contribution		$2,315,200
Fixed Cost
Fixed Manufacrtuing OH		$1,500,000
Fixed Other Admin Cost (3600000*15%)		$540,000
Net Profit		$275,200