We all know Variable costs do not include abnormal wastage but includes normal waste. This will reduce your selling Mark-up as per this below example: With Waste & Without Waste
| Variable overheads | Fixed overheads | |||||
| Material | 100000 | Accounting expenses | 30000 | |||
| Labour | 30000 | Office & Admin | 20000 | |||
| Overheads | 5000 | Rent & Utilities | 20000 | |||
| Waste | 20000 | Depreciation | 1000 | |||
| Total | 155000 | 71000 | ||||
| Sales units | 30000 | |||||
| Per unit cost | 155002 | (50% Mark-up) | ||||
| Sales price | 232504 | |||||
| Contribution | 77504 | |||||
| Net profit | 6504 | |||||
| Variable overheads | Fixed overheads | |||||
| Material | 100000 | Accounting expenses | 30000 | |||
| Labour | 30000 | Office & Admin | 20000 | |||
| Overheads | 5000 | Rent & Utilities | 20000 | |||
| Waste | 0 | Depreciation | 1000 | |||
| Total | 135000 | 71000 | ||||
| Sales units | 30000 | |||||
| Per unit cost | 135002 | (50% Mark-up) | ||||
| Sales price | 202504 | |||||
| Contribution | 67504 | |||||
| Net profit | -3496 | |||||
| Material | 3.333333 | |
| Labour | 0.193545 | |
| Overheads | 0.166667 | |
| Finished goods | 3.693545 | |
| Add Waste | 0.666667 | |
| Total VC/ Unit | 4.360212 | |
Pls add your expert opinions
CAclubindia
