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-   -   Marginal and Absorption costing (https://www.askmehelpdesk.com/showthread.php?t=183928)

  • Feb 14, 2008, 05:59 AM
    palenzo
    Marginal and Absorption costing
    Toys (Pty) Ltd is a cupboard manufacturing concern. The following information was obtained from the records for the month ended 31 January 2007:

    Units
    Opening stock 6 000
    Budgeted units from this month 20 000
    Actual Production 22 000
    Actual Sales 24 000

    Actual selling price per unit $ 50.00
    Actual variable cost per unit $ 20.00
    Actual and budgeted fixed overheads for the month $ 120 000

    Question:
    Prepare profit statements to clearly show the results for the month ending 31 January 2007 by using the following methods: Marginal costing system
    Absorption costing system
  • Feb 14, 2008, 03:21 PM
    morgaine300
    First, you need to read the note at the top which says to put homework problems over in the homework forum. If you go over there, you will also see a sticky note asking that you don't just submit nothing but a problem, because we are not here to do your homework for your. We're here to help you out with concepts and let you know if you're correct in answers, etc. Always post any attempts you've made to do the problem and or just ask a general question about the concepts, and then we can help you out.

    That said, first thing you need to do is get your total sales and costs down. Ignore the budgeted stuff. It's asking for actual statements, not budgeted statements. Anything that is PER UNIT has to be multiplied by actual production to get actual totals. So that comes first. Fixed costs are left as they are, because they're fixed and don't depend on production level.

    Different books call this different names. I believe what they are calling "marginal" costing is probably what I'd called "variable" costing. The absorption -- I always forget that one cause cost accounting is not actually my area -- but I believe that's what I'd just called a "normal" statement. i.e. the kind you learned to do before you got to all this manufacturing stuff.

    The variable costing is something you need to know and understand anyway. The top portion is the things that vary by production, followed by fixed:

    Sales Price
    -Variable Costs
    =Contribution margin
    -Fixed costs
    =Operating Income

    If you're including fixed and doing an entire statement, then the above needs to be in totals.

    A 'regular' statement is what you should have learned long ago:

    Sales
    -COGS
    =Gross Profit
    -Operating Expenses
    =Operating Income

    I don't see where you have the information available to do this second one.
  • Nov 22, 2009, 11:37 AM
    janelle woods
    marginal costing =
    sales
    add opening inventory
    add production
    less closing inventory

    From sales
    less variable cost of sales
    = contribution
    less fixed overheads
    =Profit
  • Nov 22, 2009, 11:38 AM
    janelle woods
    20000
  • Nov 22, 2009, 04:36 PM
    morgaine300

    Janelle, the thread is almost two years old, and we are also not here to just answer people's homework for them. Please read our guidelines about posting homework and what we do/do not do:
    https://www.askmehelpdesk.com/financ...-b-u-font.html

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