Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Determine Profit in Long-Term
To demonstrate the point about profit in the long-term, let us assume that a company sells and makes a single product. There are no opening stocks of the product at the beginning of period 1, for that the variable production cost is Ksh.4 and the sales price Ksh.6 per unit. However fixed costs are Ksh.2, 000 per period, of that Ksh.1, 500 are fixed production costs,
Period
Period 2
Sales
1,200 units
1,800 units
Production
1,500 units
What would the profit be in all period utilizing the following methods of costing?
a) Absorption costing. Suppose usual output is 1,500 units per period.
b) Marginal costing.
Solution
It is significant to notice that even if sales and production volumes in each period are different and then the profit for each period via absorption costing will be different from the profit via marginal costing, over the full period, net production equals sales volume, the net cost of sales is the similar, and hence the net profit is the same via either method of accounting.
a) Absorption costing: the absorption rate for fixed production overhead is,
= £ 1,500/£1,500 units
= £ 1 per unit
Period 1
Period 3
Ksh.
7,200
10,800
Production costs
Variable
6,000
12,000
Fixed
1,500
3,000
7,500
15,000
Add opening stock b/f
-
9,000
Less closing stock c/f
Production cost of sales
6,00
(Under-)/over-absorbed overhead
Total production costs
Gross profit
1,200
1,800
Other costs
500
1,000
Net profit
700
1,300
2,000
b) Marginal Costing
Variable production cost
Variable production cost of sales
4,800
Contribution
2,400
3,600
Fixed costs
4,000
Profit
400
1,600
Why is it important for financial statements and other external reports to be based on generally accepted accounting principles?
The state legislature has voted to develop a grant-in-aid policy to try and induce local communities to devote more resources to improving their infrastructure. Town O = Has a
Advantages of Standard Costing 1. Management via Exception: the standard costing is an example for management via exception. By studying the variances, management's attentio
From the information provided, determine: 1.) The amount of retained earnings at December 31 and 2.) The amount of revenues for the period. Additional data:1.)Expenses for the peri
This is defined as an actual amount paid or incurred, as opposed to estimated cost or standard cost. In contracting, actual costs amount includes direct labor, direct material, and
Changes in Variable Cost and Selling Price per Unit The contribution sales ratio is affected by any change in variable cost or selling price per unit. This ratio is a mea
Does Manufacturing Overhead include the following:1)Material Handling - labour for Purchasing Material, Shipping (inbound for raw materials and outbound for finished product - also
M aterials mix variance : It can be described as that portion of direct material usage variance which is the variation between the actual quantities of ingredients used in a mi
Factory Overhead Budget This budget represents the forecasts of each the production variable and fixed and semi-variable overheads to be incurred throughout the budget period.
The Cutting Department of the Rock Island Custom Cabinetry Corporation (a process costing production) had no work in process at the beginning of the period, 12,000 units were compl
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd