Page 108 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING
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Unit 6: Marginal Costing and Absorption Costing
Notes
Example: From the following data, calculate:
1. Number of units to be sold to earn a profi t, ` 2,40,000
2. Sales to earn a profi t, ` 2,40,000
Selling price per unit ` 80
Variable selling cost per unit ` 6
Variable manufacturing cost per unit ` 44
Fixed factory overheads ` 3,20,000
Fixed Selling cost ` 40,000
3. To find out the number of units to be sold to earn a profi t of ` 2,40,000
Solution:
Before preparing the statement of profit, the following should be computed:
1. Total Variable cost per unit = Variable selling cost per unit
+
Variable manufacturing cost per unit
= ` 6 + ` 44 = ` 50
2. Total fixed cost = Fixed factory overhead
+
Fixed selling cost
= ` 3,20,000 + ` 40,000
= ` 3,60,000
Profi t Statement
Sales ` 80
Variable Cost ` 50
Contribution ` 30
Fixed cost ` 3,60,000
Desired level Profi t ` 2,40,000
Contribution per unit of ` 30 should be equated to summation of fi xed cost ` 3,60,000 and desired
level of profi t ` 2,40,000.
The contribution can be found among the early classification method of coverage/meeting i.e.
Fixed cost + Desired level of profi t.
Total Contribution at the desired level of profi t ` 2,40,000
= ` 3,60,000 + ` 2,40,000 = ` 6,00,000
The next step is to find out the number of units to earn the desired level of profi t.
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