COST ACCOUNTING- ABSORPTION COST

Q No.1
In a period, 20000 units of Z were produced and sold. Costs and revenues were:

Sales Rs.100,000
Production cost:
Variable cost 35000
Fixed cost 15000

Administrative and marketing expense Rs.25000

Prepare income statement based on direct costing and absorption costing.

Q No.2

Assume same data as given in question number 1. Assume department produced

20000 units and sold 16000 units. So now we have 4000 units in closing stock.

Prepare income statement based on direct costing and absorption costing.

Q No.3
Stock, production and sales data for industrial Detergents Ltd. Are given in the following.

Period 1 Period 2 period 3 Period 4

Production units 60,000 70,000 55,000 65000
Sales in units 60,000 55,000 65000 70,000
Opening stock ------- ------- 15000 5000
Closing stock ------ 15000 5000 -----

Direct material $ 2.5 per unit

Direct labor 3.0
Production overhead 6.0

Selling price per unit 18

Administrative overhead are fixed at $100,000 per period and half of the production
overheads are fixed.
From the above information prepare operating statements on marginal costing and
absorption costing.
Q No.4
The following data were taken from the records of a company.

Period 1 Period 2 Period 3

Production(units) 30,000 38000 27000
Sales 30,000 27000 38000
Opening stock 11,000
Closing stock ------ 11,000 -------

Per unit cost are as follows:

Direct material $ 1.5
Direct labor 1.0
Production overhead 3.0

Selling price per unit $ 9

Administrative overheads are fixed at $25000 and one third of the production overheads
are fixed.
Prepare separate operating statements on marginal costing and absorption costing.

Q No.5
The following budgeted information relates to a company that sells one product.

JAN 2002 FEB 2002

Sales 18000 units 32000 units
Production 25000 units 25000 units

Selling price per unit $ 16

Cost per unit material 5
Direct labor 3
Variable overhead 2

Fixed production costs $75000 per month.

There is no opening stock and company policy is to absorb fixed overheads on the basis
of direct labor cost.

Calculate:
Profit or loss of Jan and Feb under:
(a) Marginal costing
(b) Absorption costing

Calculate the stock valuation at the end of Jan and Feb under each method