Professional Documents
Culture Documents
Sales xxxxx
Less: Cost of Goods Sold:
Direct Material xxx
Direct Labor xxx
Variable Factory overhead xxx
Fixed Factory overhead xxx
4th Quarter"
FG (at start) 40,000
Add: Produciton (100,000 x 50%) 50,000
Total FG available 90,000
Less: Sold units (100,000 x 80%) (80,000)
FG (at end) 10,000
1st Quarter:
FG (at start) 10,000
Add: Produciton (100,000 x 110%) 110,000
Total FG available 120,000
Less: Sold units (100,000 x 80%) (80,000)
FG (at end) 40,000
2*2
Format of Income statement under Absorption costing
Gross Profit
Less: Marketing and administrative Expenses
OPERATING INCOME
CONTRIBUTION MARGIN
Operating Income:
Absorption Costing
Direct Costing
Difference
Inventory Changes:
Absorption Costing (Increase)
Direct Costing (Increase)
Difference in inventory
Difference in units
Fixed FOH rate
450,000
(366,000)
84,000
(27,000)
57,000
450,000
(150,000)
300,000
(2,000)
298,000
(205,000)
93,000
w*2000
Format of Income statement under Absorption costing
3. Factory overhead:
Outstanding FOH (at end) 6,000
Add: Payment made 18,000
24,000
Less: Outstanding FOH (at start) (4,000)
Operating Income:
Absorption Costing
Direct Costing
Difference
Inventory Changes:
Absorption Costing (Increase)
Direct Costing (Increase)
Difference in inventory
Difference in units
Fixed FOH rate
22-5
Working:
Add: Units in process (at end) - work this period 1,000 500
EQUIVALENT PRODUCTION UNIT 65,000 65,500
ABSORPTION
Cost of Goods Sold:
OR Fixed FOH
Applied FOH 131,000
Actual FOH 135,000
Difference 4,000
Variable FOH
Applied FOH 262,000
Actual FOH 263,700
Difference 1,700
5,700
Direct
Sales 1,600,000
Less: COGS (Variable) (1,377,200)
Gross C.M / Net C.M. 222,800
Operating Income:
Absorption Costing 87,800
Direct Costing 87,800
Difference -
Dec 1,000
Inc (1,000)
-
22-7
COGS (absorption) 1,308,700
COGS (Direct) 1,180,000
REQUIRED NO:1
Equivalent Production Unit:
Material Conversion
Units completed and transferred out 110,000 110,000
Less: Units in process (at start) - all units (10,000) (10,000)
Add: Units in process (at start) - work this period - 6,000 (10000 x 3/5)
Add: Units in process (at end) - work this period 15,000 5,000 (15000 x 1/3)
EQUIVALENT PRODUCTION UNIT 115,000 111,000
REQUIRED NO: 2
Nos. of units sold:
Units
Finished goods (at start) 20,000
Add: Units completed during the year 110,000
Total Finished goods available for sale 130,000
REQUIRED NO: 3
Direct Costing Absorption
Direct Material (2 lbs x 1.50) 3.00 3.00
Direct Labor 6.00 6.00
Variable FOH 1.00 1.00
Fixed FOH - 1.10
TOTAL STANDARD PER UNIT COST 10.00 11.10
REQUIRED NO. 4:
DIRECT
Cost of Goods Sold (Variable)
ABSORPTION COSTING:
Sales (118,000 units x Rs. 20) 2,360,000
Less: Cost of Goods sold: (1,308,700)
Gross Profit 1,051,300
Less: Operating expenses -
NET INCOME (Absorption Costing) 1,051,300
RECONCILATION STATEMENT:
Work in process:
(at start) (10,000 units x 2/5 x 1.1) 4,400
(at end) (15,000 units x 1/3 x 1.1) 5,500
Increase in amount 1,100 Increase
Finished goods:
(at start) (20,000 units x 100% x 1.1) 22,000
(at end) (12,000 units x 100% x 1.1) 13,200
Decrease in amount 8,800 Decrease
7,700
Work in process:
(at start) (10,000 units x 2/5) 4,000
(at end) (15,000 units x 1/3) 5,000
Increase in units 1,000
Finished goods:
(at start) (20,000 units x 100%) 20,000
(at end) (12,000 units x 100%) 12,000
Decrease in units 8,000
7,700