13/6/20 Product Cost Period Cost

General Discussion
Absorption Costing Variable Costing Variable Costing
Direct Matrerial Marginal Costing
Direct Labour Direct Costing
Product Cost Manufacturing OverhProduct Cost EPS
Variable RS.5 / shar
Fixed Suppose there is 60% Pay
Selling expenses Period Cost How much they are gonn
Period Cost Administrative expenses Rs.3 / share

In absorption costing the cost of ending inventory is deffereed to the next period
Current ratio preferered is 2:1

Question: There were 20,000 units produced and 18,000 units were sold. The following cost was incurred. Each unit was s
Rs. / unit
Direct mate 150 Required: 1. Calcuate the total per unit Product cost by using
Direct labo 90 i. Absorption Costing Rs.295
FOH ii. Variable Costing
Variab 30 2. Calcuate the total per unit Period cost by using
Selling & 15 3. Prepare an Income statement by Absorption and Variable costing

Fixed expenses ANSWER: Calculation of Product Cost

ManufactuRs.500,000 AbsorptionVariable Costing
Selling & Rs. 350,000 Direct Mate 150 150
DL 90 90
FOH
Varia 30 30
Fixed 25 -----------
295 270

Period Cost per Unit AbsorptionVariable

Manufacturing O/H 25
Sellling & Admin Expenses
Variable 15 15
Fixed 19.5 19.5
34.5 59.5

3 ABC Company
Income statement _ Absorption Costing
For the period ended …………

Sales 18,000 * 400 7,200,000

Less: Cost of goods Sold
 Beginning Inventory 0
Add: Cost of goo 20,000 * 2 5,900,000
Cost of goods availabl5,900,000
less: Ending Inv 2,000 * 29 590,000
Cost of goods sold 5,310,000
Gross Margin 1,890,000
Less: Selling & Administartive expenses
Vasriable 18,000 * 1 270,000
Fixed 350,000
Total expense 620,000
Net profit 1,270,000

ABC Company
Income statement _ VContribution Format
For the period ended …………

Sales 18,000 * 400 7,200,000 Manufacturing concern

Less: All variable expenses Non-manufacturing or merchandisin
Variable Cost of goods sold Service organizartions
Beginning Inventory 0
Add:Cost of goods ma20,000 * 2 5,400,000 50,000
Cost of goods avail. For use 5,400,000
Les: Ending Inventory2,000 * 27 540,000
Cost of goods s 4,860,000 If Ending inventory * F/M
Add: Variable Selling 18,000 * 1 270,000 2,000 * Rs.25
Total variable expense 5,130,000 Rs.50,000
Contribution Margin 2,070,000

Less: Fixed expense

Manufacturing 500,000
Selling & Admin. 350,000
Total Fixed expense 850,000
Net profit 1,220,000
 General Discussion
Variable Costing
Marginal Costing
Direct Costing
Net Income / TCSO
Divided and Retained earning
Suppose there is 60% Payout ratio
How much they are gonna paid as dividend
Rs.3 / share

s incurred. Each unit was sold for Rs.400. it's a merchandising concern.

ption and Variable costing methods.

uring concern
ufacturing or merchandising
ganizartions

Reconciliation

If Ending inventory * F/M/O/H/Unit

2,000 * Rs.25