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  • Absorption Costing

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    Bình Nguyen
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    The document provides financial information for two years including actual production, sales, costs of goods sold, gross margin, selling and administrative costs, and earnings before interest and taxes. Key details are actual production was 4,400 units in year 1 and 3,800 units in year 2, cost of goods sold included direct materials, direct labor, variable overhead, and fixed overhead which was absorbed at a rate of $2 per unit, and earnings before interest and taxes were $2,500 in year 1 and $1,100 in year 2.

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    absorption costing

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    The document provides financial information for two years including actual production, sales, costs of goods sold, gross margin, selling and administrative costs, and earnings before interest and taxes. Key details are actual production was 4,400 units in year 1 and 3,800 units in year 2, cost of goods sold included direct materials, direct labor, variable overhead, and fixed overhead which was absorbed at a rate of $2 per unit, and earnings before interest and taxes were $2,500 in year 1 and $1,100 in year 2.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    3 views4 pages

    Absorption Costing

    Uploaded by

    Bình Nguyen
    The document provides financial information for two years including actual production, sales, costs of goods sold, gross margin, selling and administrative costs, and earnings before interest and taxes. Key details are actual production was 4,400 units in year 1 and 3,800 units in year 2, cost of goods sold included direct materials, direct labor, variable overhead, and fixed overhead which was absorbed at a rate of $2 per unit, and earnings before interest and taxes were $2,500 in year 1 and $1,100 in year 2.

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    © All Rights Reserved
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    of 4

    PU Y1 Y2

    Actual production 4400 3800


    Actual sales 4200 4000
    sales rev 42000 40000
    Less: COGS
    opening inventory 0 1600
    Add: production
    DM 2 8800 7600
    DL 3 13200 11400
    Variable OH 1 4400 3800
    FOH*absorped 2 8800 7600
    Less: closing inventory -1600 0
    less (over)/add (under) absorped -300 900
    total COGS 33300 32900
    gross margin 8700 7100
    Less selling, admin cost
    Variable 1 4200 4000
    fixed 2000 2000
    Total S&A 6200 6000
    EBIT 2500 1100

    OH cost= FOAR=budgeted fixed oh cost/budgeted production 2


    FOH p.u 2
    variable production cost 6
    unit cost 8

    FOH absorped 8800


    actual FOH 8500
    (absorp>actual)=> over absorped 300
    Contribution income statement
    Year 1 Year 2
    4200 4000
    Sales rev 42000 40000
    Less: variable exp -29400 -28000
    CM 12600 12000
    Less: fixed exp -10500 -10500
    Net income 2100 1500

    Fixed production cost 8000


    Budgeted production 4000
    FPC/unit 2 200 units deferred in inventory

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