Exhibit 1

Product

Full Absoprtion Costing

Standard
Selling Price
Unit Margin
Production Cost

Product 129

4.34

2.54

1.80

Product 243

5.89

3.05

2.84

Variable Costing
Standard
Production Cost

Product

Selling Price

Product 129

4.34

1.38

2.96

Product 243

5.89

2.37

3.52

Product

Unit Margin

Selling Price based on Absorption costing Margin %

Standard
Selling Price
Unit Margin
Production Cost

Product 129

2.36

1.38

0.98

Product 243

4.58

2.37

2.21

ng
Margin %

41.47%
48.22%

Margin %

68.20%
59.76%

costing Margin %
Margin %

41.47%
48.22%

The following amounts have been assumed to provide an example:

Particulars

Product 129

Product 243

Standard Production

25,000

25,000

Fixed Production Overhead

29,000

17,000

Standard Overhead absoption rate

1.16

0.68

Selling & Administrative Expenses

10,000

15,000

Particulars

Income Statement - June and July

June
Variable
Full Costing
Costing

Sales Revenues
Cost of sales at standard
Standard gross margin
Production cost variances
Labour
Material
Overhead Volume
Overhead spending
Actual gross margin
Fixed Production Overhead
Selling & administrative

865,428
484,640
380,788

865,428
337,517
527,911

(16,259)
12,416
1,730
3,604
382,279
301,250

(16,259)
12,416
3,604
527,672
192,883
301,250

Net Income
Profit Margin %
Cumulative Net Income

81,029
9.36%
81,029

33,539
3.88%
33,539

Based on Full Variable costing Margin % - Product 129 sold more due to higher margins
Full Absorption Costing
Particulars
Product 129
Product 243

Sales Volume
Selling Price (Exhibit 1)

25,000
#REF!

20,000
#REF!

Total Revenues
Less:
Standard Production Cost
Fixed Production Overhead
Selling & Administrative Costs

#REF!

#REF!

(63,500)
-

(61,000)
192,883

#REF!
#REF!

#REF!
#REF!

Net Income
Profit Margin %

une and July

July
Full Costing

Variable
Costing

931,710
521,758
409,952

931,710
363,367
568,343

(11,814)
8,972
(63,779)
2,832
346,163
310,351

(11,814)
8,972
2,832
568,333
192,883
310,351

35,812
3.84%
116,841

65,099
6.99%
98,638

ct 129 sold more due to higher margins

Variable Costing
Product 129
Product 243

25,000
#REF!

20,000
#REF!

#REF!

#REF!

(34,500)
(29,000)
-

(47,400)
(17,000)
192,883

#REF!
#REF!

#REF!
#REF!

50000
#REF!

40000
#REF!

Based on Full Absorption costing Margin % - Product 243 sold more due to hig
Full Absorption Costing
Particulars
Product 129 Product 243
Total

Sales Volume
Selling Price (Exhibit 1)

20,000
4.34

25,000
5.89

45,000

Total Revenues
Less:
Standard Production Cost
Fixed Production Overhead
Selling & Administrative Costs

86,800

147,250

234,050

(50,800)
(10,000)

(76,250)
(15,000)

(127,050)
(25,000)

Net Income
Profit Margin %

26,000
29.95%

56,000
38.03%

82,000
35.04%

Based on Full Variable costing Margin % - Product 129 sold more due to high
Full Absorption Costing
Particulars
Product 129 Product 243
Total

Sales Volume
Selling Price (Exhibit 1)

25,000
4.34

20,000
5.89

45,000

Total Revenues
Less:
Standard Production Cost
Fixed Production Overhead
Selling & Administrative Costs

108,500

117,800

226,300

(63,500)
(10,000)

(61,000)
(15,000)

(124,500)
(25,000)

Net Income
Profit Margin %

35,000
32.26%

41,800
35.48%

76,800
33.94%

t 243 sold more due to higher margins

Variable Costing
Product 129 Product 243

Total

50000

20,000
4.34

25,000
5.89

45,000

100000

86,800

147,250

234,050

(27,600)
(29,000)
(10,000)

(59,250)
(17,000)
(15,000)

(86,850)
(46,000)
(25,000)

20,200
23.27%

56,000
38.03%

76,200
32.56%

129 sold more due to higher margins

Variable Costing
Product 129 Product 243

Total

25,000
4.34

20,000
5.89

45,000

108,500

117,800

226,300

(34,500)
(29,000)
(10,000)

(47,400)
(17,000)
(15,000)

(81,900)
(46,000)
(25,000)

35,000
32.26%

38,400
32.60%

73,400
32.43%

40000

80000