One Direction Ltd Absorption/marginal costing

Data input Jan Feb

Opening Stock - 500
Production 2,000 3,200
Sales 1,500 3,000
Closing stock 500 700

Selling price per unit 35

Standard cost per unit
Direct labour 5
Direct material 8
Variable production overhead 2
Fixed production overhead 5
Standards production cost 20
Budgeted normal output per annum 36,000
Months in a year 12
Fixed selling and distribution overhead per annum 120,000
Variable selling and distribution overhead 0.15 of sales value

Calculation area
Increase/ decreas in stocks
Opening stocks - 500
Closing stocks 500 700
Increase / (decrease) in stock 500 200
Fixed production overhead cost per unit 5
Normal output per annum 36,000
Fixed overhead cost per annum 180,000
Budgeted fixed overhead cost per month 15,000
Jan Feb
Actual production 2,000 3,200
Fixed production overhead cost per unit 5 5
Overheads absorbed 10,000 16,000
Budgeted overheads 15,000 15,000
Over/(under) absorption - 5,000 1,000

Variable production cost per unit 15

Selling price per unit 35
Contribution per unit 20

Data output
Profit statement Absorption costing Jan Feb
Sales units 1,500 3,000
Sales revenue @35 52,500 105,000
Less cost of sales
Opening stock - 10,000
Production 40,000 64,000
Closing stock 10,000 14,000
Cost of sales 30,000 60,000
Gross profit 22,500 45,000
Less Non production costs costs
Fixed selling and distribution overhead 10,000 10,000
Variable selling and distribution overhead 7,875 15,750
Total non production costs 17,875 25,750
Net profit/(loss) 4,625 19,250
Over/(under) absorption - 5,000 1,000
Adjusted net profit/(loss) - 375 20,250

Profit statement Marginal costing Jan Feb

Sales units 1,500 3,000
Contribution 30,000 60,000
Less Variable selling and distribution costs 7,875 15,750
22,125 44,250
Less fixed costs
Production overhead 15,000 15,000
Selling and distribution 10,000 10,000
Total fixed costs 25,000 25,000
Net profit - 2,875 19,250

Reconcilliation
Absorption profit - 375 20,250
Marginal profit - 2,875 19,250
Difference 2,500 1,000

Increase/ decrease in stocks 500 200

Overheads brought forward/ carried forward 2,500 1,000