Answer for Question 1

(a) (i) Closing stock unit calculation:

Qtr 1 Qtr 2
Production units 150 160
(+) O/S - -
(-) Sales units (150) (140)
(=) C/S -** 20**

Absorption costing income statement

Qtr 1 Qtr 2
RM’000 RM’000 RM’000 RM’000
Sales 150 x 10 1500* 140 x 10 1400*
(-) COGS
O/S -* -*
Production 150 x 9 1350* 160 x 9 1440*
(-) C/S -* (1350) 20 x 9 (180)* (1260)
Gross profit 150* 140*
Over absorbed 10 ***
(W1)
150
(-) Expenses
FAOH 80* 80*
(-) Under - *
absorbed (W1)
Profit/(loss) 70** 70**

(ii) Marginal costing income statement

Qtr 1 Qtr 2
RM’000 RM’000 RM’000 RM’000
Sales 150 x 10 1500* 140 x 10 1400*
(-) COGS
O/S - * - *
Production 150 x 8 1200* 160 x8 1280*
(-) C/S - -* (1200) 20 x 8 (160)* (1120)
Contribution 300* 280*
(-) FC
FAOH 80* 80*
FPOH 150* (230) 150* (230)
Profit/(loss) 70** 50**

(W1) Under/over absorbed of production OH

Qtr 1 Qtr 2
Budgeted OH 1 x 150 = 150 1 x 160 = 160
(-) Actual OH 150 150
(Under) / over NIL 10
(b) Profit reconciliation statement
Qtr 1 Qtr 2
MC’s profit 70* 50*
(+) Increase in C/S - ** 20**
AC’s profit 70* 70*
Answer for Question 2

(a) (i) Closing inventory unit calculation:

Qtr 1 Qtr 2
Production units 120 130
(+) O/I - -
(-) Sales units (120) (110)
(=) C/I -** 20**

Absorption costing income statement

Qtr 1 Qtr 2
RM’000 RM’000 RM’000 RM’000
Sales 120 x 10 1,200* 110 x 10 1,100*
(-) COGS
O/I -* -*
Production 120 x 9 1,080* 130 x 9 1,170*
(-) C/I -* (1,080) 20 x 9 (180)* (990)
Gross profit 120* 110*
Over absorbed 10 ***
(W1)
120
(-) Expenses
FAOH 80* 80*
(-) Under - *
absorbed (W1)
Profit/(loss) 40** 40**

(ii) Marginal costing income statement

Qtr 1 Qtr 2
RM’000 RM’000 RM’000 RM’000
Sales 120 x 10 1,200* 110 x 10 1,100*
(-) COGS
O/I - * - *
Production 120 x 8 960* 130 x8 1,040*
(-) C/I - -* (960) 20 x 8 (160)* (880)
Contribution 240* 220*
(-) FC
FAOH 80* 80*
FPOH 120* (200) 120* (200)
Profit/(loss) 40** 20**

(W1) Under/over absorbed of production OH

Absorbed Qtr 1 Qtr 2
Budgeted OH 1 x 120 = 120 1 x 130 = 130
(-) Actual OH 120 120
(Under) / over NIL 10
(b) Profit reconciliation statement
Qtr 1 Qtr 2
MC’s profit 40* 20*
(+) Increase in C/I - ** 20**
AC’s profit 40* 40*
Answer for Question 3

(a) (i)

MC AC
RM RM
Direct Materials 2.00* 2.00*
Direct Labour 2.50* 2.50*
V.production O/H 0.30* 0.30*
F. production O/H 2.00*
Cost per unit 4.80 6.80

Stock movement
Units
Opening stock 6,000*
Production 28,000*
34,000*
less sales 32,000*
closing stock 2,000*

MC Profit Statement
RM
Sales 32,000@10 320,000*
Less V.cost of sales
opening stock 6,000@4.8 28,800*
Production 28,000@4.8 134,400*
163,200
less closing stock 2,000@4.8 9,600* 153,600
Gross contribution 166,400
Less variable selling O/H 16,000*
Net contribution 150,400

Less fixed expenses

Production 80,000 (40,000@2)*
Administration 40,000 (40,000@1)* 120,000
Net profit 30,400*

(ii) AC Profit Statement

RM
Sales 320,000*
Less full cost of sales
Opening stock 6,000@6.8 40,800*
Production 28,000@6.8 190,400*
231,200
less closing stock 2,000@6.8 13,600* 217,600
102,400
less under- absorbed overhead 24,000*
78,400
less expenses
Administration 40,000*
Selling 16,000 * 56,000
Net profit 22,400*

(b) Profit Reconciliation Statement

MC profit 30,400
AC profit 22,400
8,000

Difference in profit due to difference in stock valuation,

Decrease in stock (6,000 –2,000) RM2 = RM8,000
Answer for Question 4

(a) Standard cost and profit for one unit of ‘XY’.

DM RM
-X 4x6 24*
-Y 3x2 6* 30
DL 4x6 24*
Prime cost 54
Production OH
-V 4x1.5 6*
-F 4x2.25 9* 15
Total cost 69

(b) (i) Marginal costing income statement

August RM September RM
Sales 2500x90 225,000* 5200x90 468,000*
(-) COGS
O/I -* 500x60 30,000*
Production 3,000x60 180,000* 5000x60 300,000*
(-) C/I 500x60 (30,000)* (150,000) 300x60 (18,000)* (312,000)
Contribution 75,000* 156,000*
(-) FC 9x(96/12) (72,000)* (72,000)*
Profit/(loss) 3,000* 84,000*

(i) Absorption costing income statement

August RM September RM
Sales 2500x90 225,000* 5200x90 468,000*
(-) COGS
O/I -* 500x69 34,500*
Production 3000x69 207,000* 5000x69 345,000*
(-) C/I 500x69 (34,500)* (172,500) 300x69 (20,700)* (358,800)
Gross profit 52,500* 109,200*
(-) Under (45,000)*** (27,000)***
absorbed (W1)
Profit/(loss) 7,500* 82,200*

Closing inventory unit calculation:

August September
Production units 3000 5000
(+) O/I - 500
(-) Sales units (2500) (5200)
(=) C/I 500 300
 (W1) Under/over absorbed of production OH
August RM September RM
Actual OH 9x3000 = 27,000 9x5000 = 45,000
(-) Budgeted OH 9x8000 = 72,000 72,000
(Under) / over (45,000) (27,000)

(c) Profit reconciliation statement

August RM September RM
MC’s profit 3,000 84,000
(+) Increase in C/I 500x9 = 4,500* -
(-) Decrease in C/I - 200x9 = 1,800*
AC’s profit 7,500* 82,200*
 Answer for Question 5

(a) Standard cost per unit

RM
Selling price 16.00
Direct materials (RM6 per kg x 1 kg) 6.00 1M
+ Direct labour (RM11 per hr x 0.25 hr) 2.75 1M
+ Variable overhead (RM12 per hr x 0.25 hr) 3.00 1M
= Variable production cost per unit 11.75
+ Fixed production overhead per unit (RM10 per hr x 0.25 hrs) (F.POAR) 2.50 1M
= Full production cost per unit 14.25
Profit 1.75 1M
(Subtotal: 5M)

(b) (i) PROFIT STATEMENT - ABSORPTION COSTING

JUNE JULY
RM RM RM RM Marks
Sales (sales units x selling price) 11,200 12,800 1M
(700 800 x 16)
Less cost of sales: (x full production cost per unit)
Opening stock (0 100 x 14.25) 0 1,425 1M
Add: production cost (800 900 x 14.25) 11,400 12,825 1M
11,400 14,250
Less: closing stock (100 200 x 14.25) (1,425) (2,850) 1M
(9,975) (11,400)
Gross profit before adjustment 1,225 1,400 1M
Add / Less: Over / (under) absorption (125) 125
Gross profit after adjustment 1,100 1,525 1M
Less: other costs
Fixed selling overhead 300 300
Fixed administration overhead 200 200 1M
(500) (500)
Net profit
600 1,025 1M
(Subtotal: 8M)
(+ workings 5M = 13M)
 (b) (ii) PROFIT STATEMENT - MARGINAL COSTING

JUNE JULY
RM RM RM RM Marks
Sales 11,200 12,800 1M
Less cost of sales: (x variable production cost per unit)
Opening stock (0 100 x 11.75) 0 1,175 1M
Add: production cost (800 900 x 11.75) 9,400 10,575 1M
9,400 11,750
Less: closing stock (100 200 x 11.75) (1,175) (2,350) 1M
(8,225) (9,400)
Contribution 2,975 3,400 1M
Less: fixed costs
Fixed production overhead 2,125 2,125
Fixed selling overhead 300 300
Fixed administration overhead 200 200 1M
(2,625) (2,625)
Net profit 350 775 1M

(Subtotal: 7M)

WORKINGS

W1. Unit analysis

JUNE JULY
Units Units Marks
Opening stock 0 100
+ Production units 800 900
- Sales units (700) (800)
= Closing stock 100 200 2M

W2. Over or under-absorption

JUNE JULY
RM RM Marks
Overhead absorbed
(F.POAR x production units of the month)
(2.50 x 800 900) 2,000 2,250 1M

- Actual or budgeted overhead

(F.POAR x normal production units)
(2.50 x 850) (2,125) (2,125) 1M

= Over / (under) absorption (125) 125 1M

Answer for Question 6

WORKINGS

W1. Production cost per unit RM

Direct materials 30
+ Direct labour 26
+ Variable factory overhead 20
= Variable production cost per unit 76
+ Fixed production overhead per unit (F.POAR) 16
= Full production cost per unit 92

W2. Units analysis

Feb
Units
Opening stock 1,000
+ Production units 4,500
- Sales units -3,300
= Closing stock 2,200

W3. Over or under-absorption

(for fixed production overhead in Absorption Costing only)
Feb
RM
Overhead absorbed
(F.POAR x production units of the month) (16 x 4,500) 72,000

- Actual or budgeted overhead

(F.POAR x normal production units) (16 x 4,000) -64,000

= Over / (under) absorption 8,000

Adjustment to profit Add
(a) (i) PROFIT STATEMENT - ABSORPTION COSTING

Feb
RM RM
Sales (sales units x selling price) (3,300 x 180) 594,000
Less cost of sales: (x full production cost/unit)
Opening stock (1,000 x 92) 92,000
Add: production cost (4,500 x 92) 414,000
506,000
Less: closing stock (2,200 x 92) -202,400
-303,600
Gross profit before adjustment 290,400
Add / Less: Over / (under) absorption 8,000
Gross profit after adjustment 298,400
Less other costs:
Variable distribution cost (7% x 594,000) 41,580
Fixed selling cost 87,000
Fixed administration cost 74,000
-202,580
Net profit 95,820

(a) (ii) PROFIT STATEMENT - MARGINAL COSTING

Feb
RM RM
Sales 594,000
Less cost of sales: (x variable prodn cost/unit)
Opening stock (1,000 x 76) 76,000
Add: production cost (4,500 x 76) 342,000
418,000
Less: closing stock (2,200 x 76) -167,200
-250,800
Gross margin 343,200
Less: variable distribution cost -41,580
Contribution 301,620
Less: fixed costs
Fixed production overhead 64,000
Fixed selling cost 87,000
Fixed administration cost 74,000
-225,000
Net profit 76,620
(b) PROFIT RECONCILIATION STATEMENT
Feb
RM
Profit as per Marginal Costing 76,620
Add: Fixed production overhead absorbed into closing stock
(16 x 2,200) 35,200
Less: Fixed production overhead charged out from opening stock
(16 x 1,000) -16,000
Profit as per Absorption Costing 95,820