Marginal costing
This query is : Resolved
06 November 2012
A Company has an opening stock of 6000 units of output. The Prduction planned for the current period is 24000 units and expected sales for the current period amount to 28000 units. The Selling price per unit of output is Rs.10. Variable Cost per unit is expected to be Rs.6 per unit while it was only Rs.5 per unit during the previous period. What is the break even volume for the current period if the total fixed costs for the current period is rs.86000? Assume that the first in first out system is FRollowed.and also LIFO, WEIGHTED AVERAGE METHOD??? (NOV.87)...PLEASE GIVE ME THE ANSWER......
Amol S Joglekar
(Expert)
06 November 2012
FIFO : out of 28000, 6000 units will contribute 30,000, the rest of the fixed cost viz 86,000-30000=56000 is to be recovered at the rate of Rs4 per unit.
So 56000/4=13500......
13500+6000=19500 will be the break even quantity. 19501st unit will start generating marginal profit.
So 56000/4=13500......
13500+6000=19500 will be the break even quantity. 19501st unit will start generating marginal profit.
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Amol S Joglekar
(Expert)
06 November 2012
Now request you to find it out with not only weighted average but also LIFO method.
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07 November 2012
56000/4=14000 not 13500
as per fifo it's 20000 units
as per lifo ans 21500
as per weighted average 20476
thank you
as per fifo it's 20000 units
as per lifo ans 21500
as per weighted average 20476
thank you
Amol S Joglekar
(Expert)
07 November 2012
Thank you Jalpa. That was the catch in the solution. You cracked it nicely. Thanks for pinpointing the mistake accurately. Appreciate your efforts.
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