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Marginal & Absorption Costing

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Prajapati Arjun
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25 views17 pages

Marginal & Absorption Costing

Uploaded by

Prajapati Arjun
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Marginal v/s absorption

• From the following cost, production and sales


data of Competent Motors Ltd., prepare
comparative income statement for three years
under (i) absorption costing method, and (ii)
marginal costing method. Indicate the unit
cost for each year under each method. Also
evaluate the closing stocks. The company
produces a single article for sale
Particulars Year
2001 2002 2003
Selling price per unit 20 20 20
Variable manufacturing cost per unit 10 10 10
Total fixed manufacturing cost 5,000 5,000 5,000
Opening stock 500

Units produced 1,000 1,500 2,000


Units sold 1,000 1,000 1,500
Closing stock 500 1,000
Under absorption costing profit calculation

2001 2002 2003


Per Total Per Total Per Total
Unit Unit Unit Rs.
Rs. Rs. Rs. Rs. Rs.

Variable cost 10 10,000 10 15,000 10.00 20,000

Fixed cost 5 5,000 3.33 5,000 2.50 5,000

Total cost of production 15 15,000 13.33 20,000 12.50 25,000

Add: Opening stock - - 6,665

15 15,000 13.33 20,000 12.50 31,665

Less : Closing Stock - 6,665 12,500


Cost of production of goods sold
15 15,000 13.33 13,335 12.50 19,165

Profit 5 5,000 6.67 6,665 7.50 10,835

Sales 20 20,000 20.00 20,000 20.00 30,000


Under Marginal costing profit calculation

2001 2002 2003


Per Total Per Total Per Total
Unit Rs. Rs. Unit Rs. Unit Rs.
Rs. Rs.

Variable cost 10 10,000 10 15,000 10 20,000


Add: Opening stock --- --- --- --- --- 5,000

Less: Closing stock 10 10,000 10 15,000 10 25,000


--- --- --- 5,000 --- 10,000
Cost of production of goods 10 10,000 10 10,000 10 15,000
sold

Sales 20 20,000 20 20,000 --- 30,000


Contribution 10 10,000 10 10,000 15,000
Less: Fixed cost 5,000 5,000 5,000

Profit 5,000 5,000 10,000

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