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08 Activity 02

LeaveLand Group produced 8,000 units total and sold 3,000 units. They want to calculate gross margin using marginal and absorption costing. Under marginal costing, the contribution margin is calculated as sales (P300,000) minus the change in inventory valued at marginal cost (P120,000 opening stock - P45,000 closing stock), equaling P225,000. Gross profit under marginal costing is contribution margin (P225,000) minus fixed overhead (P30,000), equaling P195,000. Under absorption costing, gross profit is also P195,000 and calculated as sales (P300,000) minus the change in inventory valued at full cost (P168,000

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138 views2 pages

08 Activity 02

LeaveLand Group produced 8,000 units total and sold 3,000 units. They want to calculate gross margin using marginal and absorption costing. Under marginal costing, the contribution margin is calculated as sales (P300,000) minus the change in inventory valued at marginal cost (P120,000 opening stock - P45,000 closing stock), equaling P225,000. Gross profit under marginal costing is contribution margin (P225,000) minus fixed overhead (P30,000), equaling P195,000. Under absorption costing, gross profit is also P195,000 and calculated as sales (P300,000) minus the change in inventory valued at full cost (P168,000

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JAVELLANA JESSEL G.

BSBA-OM 201A

LeaveLand Group

LeaveLand Group desires to determine the gross margin associated with their production using marginal
and absorption costing. The operating statistics of the company were as follows:

Total units produced 8,000 units

Total units sold 3,000 units

Selling price per unit P100

Total fixed overheads P30,000

The following are the cost structure per unit of output produced:

Direct Materials P5

Direct Wages 5

Variable Overhead 5

Fixed Overhead 6

A. Closing stock
Closing Stock= Unit Produced – Unit Sold
= 8,000 – 3,000
= 5,000
Marginal costing
B. Marginal Costing Product= Direct Material + Direct Wages + Variable Overhead
=5+5+5
= 15
Absorption costing
C. Total Cost of the Product= Direct Material + Direct Wages + Variable Overhead + Fixed Overhead
=5+5+5+6
= 21
D. Amount of sales value
Amount of sales value= Unit Sold × Selling Pricing Per Unit
= 3,000 × 100
= 300,000
Marginal Costing
E. Opening Stock= Unit Produced × Marginal cost of Production
= 8,000 × 15
= 120, 000
Closing Stock= Unit Sold × Marginal cost of Production
= 3,000 × 15
= 45,000
JAVELLANA JESSEL G. BSBA-OM 201A

Absorption Costing
F. Opening Stock = Unit Produced × Total cost of Production
= 8,000 × 21
= 168,000
Closing Stock = Unit Sold × Total cost of Production
= 3,000 × 21
= 63,000
Marginal Costing
G. Contribution margin and gross profit using marginal costing
Contribution Margin = Amount of Sales Value- (Opening Stock – Closing Stock)
= 300,000 – (120,000 – 45,000)
= 300,000 – 75,000
= 225,000
Gross Profit= Contribution margin – Fixed Overhead
= 225 – 30,000
= 195,000
Absorption Costing
H. Gross profit using absorption costing
Gross profit = Amount of Sales Value – (Opening Stock – Closing Stock)
= 300,000 – (168,000 – 63,000)
= 300,000 – 105,000
= 195,000

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