Page 69 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II

Notes Profit = Contribution – Fixed cost OR P = C – FC
Sales – Variable cost = Fixed cost + Profit OR S – V = F + P
Problem 1:
From the following information, find out the (a) Contribution, and (b) Amount of profit earned
during the year:
Fixed cost ` 5,00,000
Variable cost ` 10 per unit

Selling price ` 15 per unit
Output 1,50,000 unit
Solution:
(a) Calculation of contribution:

Contribution = Sales – Marginal cost
Contribution = (1,50,000 × 15) – (1,50,000 × 10)
Contribution = 22,50,000 – 15,00,000
Contribution = ` 7,50,000

(b) Calculation of amount of profit:
Profit = Contribution – Fixed cost
Profit = 7,50,000 – 5,00,000
Profit = ` 2,50,000

Problem 2:
From the following information, find out the (a) Contribution, and (b) Profit earned during the
year:

Selling price ` 10 per unit
Variable cost ` 7 per unit
Fixed cost ` 2,00,000
Output 1,00,000 units

Solution:
(a) Calculation of contribution:
Contribution = Sales – Variable cost
Contribution = (1,00,000 × 10) – (1,00,000 × 7)

Contribution = 10,00,000 – 7,00,000
Contribution = ` 3,00,000
(b) Calculation of profit:
Profit = Contribution – Fixed cost

Profit = 3,00,000 – 2,00,000
Profit = ` 1,00,000

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