Page 54 - DCOM206_COST_ACCOUNTING_II

Unit 3: Absorption Costing and Marginal Costing

The opening and closing stocks consisting of both finished goods and equivalent units of work Notes
in progress are as follows:

Particulars Quarter I Quarter II Quarter III Quarter IV Total
Opening stock [Units] — — 6,000 2,000 —
Production [Units] 26,000 30,000 24,000 30,000 1,10,000
Sales [Units] 26,000 24,000 28,000 32,000 1,10,000
Closing stock [Units] — 6,000 2,000 — —

Solution:
The following statements are prepared to show profits under marginal costing and absorption
costing.

Statement Showing Profit/Loss under Marginal Costing
Particulars Quarter I Quarter II Quarter III Quarter IV Total
` ` ` ` `
[A] Sales @ ` 8* 2,08,000 1,92,000 2,24,000 2,56,000 8,80,000
[B] Marginal costs
 Opening Stock @ ` 4 — — 24,000 8,000
 Production @ ` 4 1,04,000 1,20,000 96,000 1,20,000 4,40,000
 Total [Opening stock + 1,04,000 1,20,000 1,20,000 1,28,000 4,40,000
Production]
 Less: Closing Stock @ ` 4 — 24,000 8,000
 Cost of goods sold 1,04,000 96,000 1,12,000 1,28,000 4,40, 000
[C] Contribution [A – B] 1,04,000 96,000 1,12,000 1,28,000 4,40,000
[D] Fixed Cost 52,000 52,000 52,000 52,000 2,08,000
[E] Profit [C – D] 52,000 44,000 60,000 76,000 2,32,000

Note Sales value is computed by multiplying the number of units sold in each quarter
by the selling price per unit of ` 8.

Statement of Profit under Absorption Costing

Particulars Quarter I Quarter II Quarter III Quarter IV Total
` ` ` ` `
[A] Sales @ ` 8 2,08,000 1,92,000 2,24,000 2,56,000 8,80,000
[B] Opening Stock @ ` 6 — — 36,000 12,000
[C] Cost of Production@ ` 6* 1,56,000 1,80,000 1,44,000 1,80,000 6,60,000
[D] A + C 1,56,000 1,80,000 1,80,000 1,92,000 6,60,000
[E] Closing Stock@ ` 6 — 36,000 12,000 — —
[F] Cost of Sales [Actual] D – E 1,56,000 1,44,000 1,68,000 1,92,000 6,60,000
[G] Profit before adjustment of under or 52,000 48,000 56,000 64,000 2,20,000
over absorbed fixed cost [A – F]
Add: Over absorbed fixed overheads** — 8,000 — 8,000 16,000
Less: Under absorbed fixed overheads*** — — 4,000 — 4,000
Contd...
Profit 52,000 56,000 52,000 72,000 2,32,000

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