Question: A company made 17500 units at a total cost of Rs. 16 each. Three quarters of the cost were variable and one quarter fixed. 15000 units were sold at Rs.25 each. There were no opening stocks. By how much will profit caluclated under absorption costing differ f rom the profit if marginal costing principles were used ?
Solution :
As per Marginal Costing
Sales = 15000 x 25 = 375000
(-) Variable Cost = 15000 x 12 = 180000
(-) Closing Stock = 2500 x 12 = 30000
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165000
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(-) Fixed Cost = 17500 x 4 = 70000
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95000 – Profit as per Marginal Costing
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As per Absorption Costing
Sales = 15000 x 25 = 375000
(-) Variable Cost = 15000 x 12 = 180000
(-)Fixed Cost = 15000 x 4 = 60000
(-)Closing Stock = 2500 x 16 = 40000
(-) Under absorption fixed
Production cost overhead= 2500 x 4 = 10000
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85000 – Profit as per Absorption costing
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Can anyone correct me if I am wrong?
CAclubindia
