Marginal & Absorption costing
Kalimonde Ltd commenced business on 1st march making one product only. The standard cost of which is as follows:
T.shs | |
Direct material | 8 |
Direct labour | 5 |
Variable production overhead | 2 |
Fixed production overhead | 5 |
Total | 10 |
---|
The fixed production overhead figure has been calculated on the basis of normal output of 36,000 units per annum.
You are to assume that there was no expenditure or efficiency variances and that budgeted fixed expenses are incurred evenly over the year. March and April are to be taken as equal months.
Selling, distribution and administrative expenses are:
Fixed T.shs 120,000 per annum
Variable 15% of sales value
The selling price per unit is T.shs 35 and the number of units produced and sold was:-
March | April | |
(units) | (units) | |
Production | 2,000 | 3,200 |
Sales | 1,500 | 3,000 |
You are required to:
The following data were taken from the records of Bushiri Manufacturing Co. The company manufactures single product. The data relate to the company's first year of operations is as follows.
Units produced: | 40,000 |
Units sold: | 37,500 |
Variable cost per unit:
Direct material | TZS 5,000 |
Direct labour | TZS 3,000 |
Variable overhead | TZS 1,400 |
Variable selling cost | TZS 1,200 |
Selling price per unit | TZS 12,000 |
Fixed costs:
Selling and administratives | TZS 75,000,000 |
Manufacuring | TZS 50,000,000 |
A company has the following costs for its single product, based on planned production and sales of 46,000 litres in a period:
T.shs per litre | |
Prime costs | 520 |
production overhead-all fixed | 280 |
Non-production overhead: | |
-Variable | 65 |
-Fixed | 170 |
Total | 1,035 |
Actual production and sales in the period were:
Production | 46,000 litres |
Sales | 45,600 (at Tshs 1,200 per litre) |
There was no finished stock at the beginning of the period. Variable costs per litre and total fixed costs in the period were as planned. Variable non-production overheads vary in total with the number of litres sold.
Required:
Serengeti Meat Ltd. started business on 1st January 2010 and incurred the following costs during the first three years. Year ended 31st December
2010 | 2011 | 2012 | |
T.shs | T.shs | T.shs | |
Direct material | 60,000 | 49,900 | 52,200 |
Direct labour | 48,000 | 44,000 | 45,000 |
Variable manufacturing overhead | 24,000 | 30,000 | 40,000 |
Fixed manufacturing overhead | 40,000 | 40,000 | 40,000 |
production each year (Units) | 16,000 | 14,000 | 14,000 |
Sales each year (Units) | 14,000 | 14,000 | 15,000 |
Sales during the first three years were at T.shs 20 per unit.
Variable selling expenses has been 5% of sales value in all years.
The budgeted production was 16,000 units every year.
Required:
The following information relates to product J for quarter 3 which has just ended:
Production | Sales | Fixed overhead | Variable cost | |
(Units) | (Units) | (T.shs'000) | (T.shs'000) | |
Budget | 40,000 | 38,000 | 300 | 1,800 |
Actual | 46,000 | 42,000 | 318 | 2,070 |
Selling price of product J is T.shs 72 per unit.
The fixed overheads were absorbed at a predetermined rate per unit.
At the beginning of quarter 3 there was an opening stock of product J of 2,000 units, valued at T.shs 25 per unit variable cost and T.shs 5 per unit fixed overheads; Using:
Required:
Majariwa Motors Limited assembles and sells motor spare parts. It uses an actual costing system, in which unit costs are calculated on a monthly basis. Data relating to the month of March, 2018 is as given below:-
Particulars: | Units | Shs. |
---|---|---|
Opening inventory | 150 | |
Production | 400 | |
Sales | 520 | |
Variable Cost Data: | ||
Manufacturing costs per unit produced shs. | 10,000 | |
Distribution costs per unit sold | 3,000 | |
Fixed Cost Data: | ||
Manufacturing costs | 2,000,000 | |
Marketing costs | 600,000 |
The selling price per motor spare part is shs. 24,000.
Required:
The Management of the Company intended to have two income statements, one based on variable costing and another based on absorption costing for decision purposes. In order to prepare these statements, the following information was assembled and handled to you for necessary action:
The expenditure in question included the following:
Tshs | |
Unit direct material costs | 500 |
Unit direct labor costs | 600 |
Unit variable factory overhead cost | 400 |
Annual fixed factory overhead | 99,000,000 |
Annual fixed administration costs | 250,000,000 |
Annual fixed distribution cost | 100,000,000 |
Required:
Prepare two statements of income, one based on variable costing and another based on absorption costing.
A Pharmaceutical company produces formulations having a shelf life of one year. The company has an opening stock of 15,000 boxes on 1st January. It has produced 65,000 boxes as was in the previous year. The total sale for the current year is 75000 boxes.
Costing department has worked out escalation in cost by 25% on Variable Cost and 10% on Fixed Cost for the current year. The actual Fixed Cost for the current year is T.shs. 1,430,000. New price announced for the current year is T.shs.50 per box. Variable Cost of the opening stock is T.shs. 20 per box.
Required:
Calculate the profits that would be realized on the sale during the current year under marginal costing approach and absorption costing approach assuming FIFO method is used.