Nineveh Misti M.

Sonquipal

BSBA – 1

C8. Activity 2

LEAVELAND GROUP

Leaveland Group desires to determine the gross margin associated with their production using marginal
and absorption costing. The operating statistics of the company were as follows:

Total units produced 8,000 units

Total units sold 3,000 units
Selling price per unit ₱100.00
Total fixed overheads ₱30,000.00

The following are the cost structure per unit of output produced:

Direct Materials ₱5.00

Direct Wages ₱5.00
Variable Overhead ₱5.00
Fixed Overhead ₱6.00

A. Closing stock

Closing stock = Units produced – Units sold

= 8,000 units – 3,000 units

= 5,000 units

B. Marginal cost

Marginal cost of production = Direct materials + Direct wages + Variable overhead

= P5 + 5 + 5

= P15

C. Total cost of production

Total cost of production = Direct materials + Direct wages + Variable Overhead + Fixed overhead

= P5 + 5 + 5 + 6

= P21
 D. Amount of sales value

Amount of sales value = Units sold x Selling price per unit

= 3,000 units x P100

= P300,000

E. Opening and closing stock using marginal costing

Opening stock = Units produced x Marginal cost of production

= 8,000 units x P15

= P120,000

Closing stock = Units sold x Marginal cost of production

= 3,000 Units x P15

= P45,000

F. Opening and closing stock using absorption costing

Opening stock = Units produced x Total cost of production

= 8,000 units x P21

= P168,000

Closing stock = Units sold x Total cost of production

= 3,000 units x P21

= P63,000

G. Contribution margin and gross profit using marginal costing

Contribution margin or Gross Profit = Amount of sales value – (Opening stock – Closing stock)

= 300,000 – (120,000 – 45,000)

= 300,000 – 75,000

= P225,000

Gross profit = Contribution margin – Fixed overhead

= 225,000 – 30,000

= P195,000
 H. Gross profit using absorption costing

Contribution margin or Gross Profit = Amount of sales value – (Opening stock – Closing stock)

= 300,000 – (168,000 – 63,000)

= 300,000 – 105,000

= P195,000