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
ASSUMPTIONS OF BREAK EVEN ANALYSIS 1. Fixed costs for all time remain constant. 2. All costs are divided into fixed and variable costs. 3. Selling price will not alter de
In this section we have tried to develop the concept of flow of funds inside the organization. Starting along with the funds requirement for an organization, we have tried to trace
1. when using the internal rate of return method to evaluate capital spending on a new project, the project will be accepted if the internal rate of return is equal to or greater t
advantages and disadvantages of just in time
what is the procedure of purchase of materials in large organisation?
Direct Labour Rate Variance It is the difference among the actual direct labour rate and the standard direct labour rate for the total hours worked. Utilizing an equation,
How do I figure the estimated activity and estimated allocation base?
Visual Fit Method of Cost Estimation Cost estimation is based on past data regarding the dependent variable and the cost driver. The previous data on cost levels and the outpu
Q. Why communities begin using FCA? There are several reasons why communities start by means of FCA. For instance: • To elucidate more evidently MSW costs to people. • It is
The time of cashflows for the project are as follows; Operating Income (rent) is received annually, in advance. For NPV purposes they are assumed to have been received at th
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