Anticipated profit using marginal cost

Particulars Sold units Cost/Price Total

Total Revenue 75,000 36 2,700,000
Less: Variable costs
Direct material 75,000 13 975,000
Direct labour 75,000 9 675,000
Variable selling & distribution 75,000 5 375,000
Other variable production overhead 75,000 3 225,000
Variable costs 2,250,000
Gross profit 450,000
Fixed costs 360,000
Anticipated profit 90,000
Steps Calculation a full cost using absorption costing
1 Revenue
Sold units x Sales pricing = Total revenue
2 Cost of goods sold
Sold units x Direct material = Direct material Cost
Sold units x Direct labour = Direct labour Cost
Sold units x Variable selling & distribution = Variable selling & distribution Cost
Sold units x Other variable production overhead = Other variable production overhead Cost
Fixed costs Total fixed costs
3 Total production costs SUM(Costs)
Unit cost = Total production costs ÷ Actual produced units
Ending inventory = (Actual produced units - Sold units) x Unit cost
Cost of goods sold = Total production costs - Ending inventory
3 Profit (loss) = Total revenue - Cost of goods sold
 Absorption costing
Given data:
Budgeted produced units 90,000
Actual produced units 91,000
Direct material 13
Direct labour 9
Variable selling & distribution 5
Other variable production overhead 3
Sold units 75,000
Selling price unit 36
Ending inventory 16,000

Statement of profit (loss):

Revenue:
Sales 2,700,000
Cost of goods sold:
Direct material 1,183,000
Direct labour 819,000
Variable selling & distribution 455,000
Other variable production overhead 273,000
Total variable costs 2,730,000
Fixed costs 360,000
Total production costs 3,090,000
Unit cost 33.956
Less: Ending inventory 543,297
Cost of goods sold 2,546,703
Profit (loss) before taxes 153,297
 Particulars Marginal Cost Absorption Costing
Produced units 91,000 91,000
Sold Units 75,000 75,000
Revenue 2,700,000 2,700,000
Variable costs 2,250,000 2,730,000
Fixed costs 360,000 360,000
Total production costs 2,250,000 3,090,000
Unit cost 30 33.956
Less: Ending inventory 543,297
Cost of goods sold 2,546,703
Net Profit (loss) 90,000 153,297
Difference 63,297
Price based on full-cost plus Price based on marginal-cost plus
Cost-plus pricing = Break-even pricing x Mark-up value Particulars
Break-even pricing 2,160,000 Direct material
Mark-up value 30% Direct labour
Cost-plus pricing 2,808,000 Variable selling & distribution
Sold units 75,000 Other variable production overhead
Price per unit (30% mark-up) 37.44 Total costs increased
Actual price per unit 36 Price per unit
Profit per unit 1.44 Profit per unit increased
Sold units 75,000 Sold units
Increase on Profit 108,000 Increase on Profit
Revenue 2,808,000 Revenue
 Actual Increase 30%
13 16.9
9 11.7
5 6.5
3 3.9
39
36 46.8
7.8
75,000
585,000
2,700,000 3,285,000