d. Marginal Costing leads to Contribution Margin (CM) then Net Profit.

33. Absorption Costing

Sales XXXX Less Cost of Goods SoldOpening Stock XXXX
{Opening Stock x (Fixed FOH Rate/unit +Variable FOH Rate/unit)}

+ Production XXXX
{Units Produced x (Fixed FOH Rate/unit +Variable FOH Rate/unit)}

(-) Closing Stock (XXXX)

{Closing Stock x (Fixed FOH Rate/unit +Variable FOH Rate/unit)}

Cost of Goods Sold XXXX +Under / (-)Over Applied FOH XXXXCost of Goods Sold at Actual XXXX (XXXX) Gross Profit XXXX Less Marketing Expenses (if any)

Fixed Marketing Expenses XXXX+ Variable Marketing Expenses XXXXTotal Marketing Expenses XXXX (XXXX)

Net Profit by Absorption Costing XXXX

Notes to Absorption Costing:e. Over/Under Applied FOHBudgeted Production (Budgeted units x Fixed FOH Rate/unit) XXXX(-) Actual Production (Actual units x Fixed FOH Rate/unit) (XXXX)Over/Under Applied FOH XXXX If Actual Production > Budgeted Production ^ Over Applied FOH

If Actual Production < Budgeted Production

^ Under Applied FOHf. If Over Applied FOH ^ Minus from COGS at Actualg. If Under Applied FOH ^ Add in COGS at Actualh. Absorption Costing leads to Gross Profit (GP) then Net Profit . Confusing Terminologies of Cost Accounting 1. Inventory = Stock 2. Re-Order Period = Lead Time3. EOQ = Re-Order Quantity4. Standard = Budgeted5. Marginal Costing = Direct Costing6. Absorption Costing = Full Costing = Factory Cost = Production Cost7.

Total Production Cost = Manufacturing Cost...................................................................................... .......................................................... Best Regards, (DILAWAR ABBAS) B. Com (IT), MBA (Finance)digital_darwaish@hotmail.com