ABSORPTION AND MARGINAL COSTING
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- Elwin Harmon
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1 STUDENT NOTES ABSORPTION AND MARGINAL COSTING Accountants and managers require financial information for many different purposes. To help make such decisions, costs can be classified in different ways: direct or indirect (in relation to production product costs) fixed, variable or semi-variable (in relation to time period costs). The difference in the treatment of fixed and variable costs is often crucial in making these decisions. The way fixed and variable costs are treated can give substantially different valuations of stock and hence profits. Dividing costs into product costs or period costs is essential in considering cost elements in absorption and marginal costing. Product costs: can be identified with a product, e.g. direct wages and direct materials. can be charged against revenue in the period when the products to which they relate are sold. form part of the valuation of stock of finished goods and work-inprogress. Period costs are not included in the valuations of stock. vary with production. Period costs: are those associated with time as opposed to product, e.g. annual insurance. can be charged against revenue in the period in which they are incurred. are usually fixed over a period of time, e.g. annual rent. ABSORPTION AND MARGINAL COSTING (H) 1
2 Advantages of marginal costing Easy for non-accountants to understand and can be used with standard costing systems. Can be used in break-even analysis. Fixed costs are incurred over a period of time. Such costs are not therefore directly related to production and hence are not included in the valuation of stock. Profits calculations are more realistic because they are related to the time period during which they arise. Fixed costs are not carried forward from one accounting period to the next. Assists when choices have to be made between alternatives, and contribution (selling price variable costs) is a critical consideration. Pricing policy can be related to variable costs as fixed costs are deducted from total contribution. This can assist when making decisions regarding special orders. The unit cost is pre-determined. Problems arising from a variable fixed cost per unit are eliminated. Apportionment of overheads is required. Overhead apportionment is frequently calculated on a subjective basis of the relationship between fixed costs and departmental activity. Under or over-absorption of overheads is avoided. (See section on under and over-absorption of overheads). The procedures to deal with under or over-absorption of overheads takes place when the level of activity differs from the pre-planned level. Useful when a costing is required for a specific decision that management is considering. Advantages of absorption (total) costing Fixed costs are incurred as a natural part of production. As absorption costing includes all relevant production costs in valuing closing stock a more realistic profit figure can be calculated. In marginal costing losses can occur in periods when sales are low and total fixed costs are written off. If the goods are sold in a later period then a distortion in the profit figures may arise. 2 ABSORPTION AND MARGINAL COSTING (H)
3 Absorption costing gives better information for pricing products as it includes both variable and fixed costs. Marginal costing may lead to lower prices being offered if the firm is operating below capacity. Customers may still expect these lower prices as demand/capacity increases. Which method should be used? As both methods have advantages and disadvantages, the precise method to use will depend on specific circumstances and the nature of the product/business. Where the viability of a product is desired, marginal costing would be used. However, a firm with a long-maturing product, such as whisky, may decide absorption costing is the more appropriate method. Only one method will be used by a firm. Over and under-absorption of overheads In the first set of examples provided in this resource the problem of over and under-absorption of overheads has been avoided by assuming that the actual and normal or planned output are the same. This is an unrealistic assumption. Consider the following example. Normal/planned production level 8,000 units Normal/planned fixed overheads 40,000 Actual production 7,500 units Fixed cost per unit = 40,000/8,000 = 5 Cost charged to production = 7,500 5 = 37,500 Under-absorbed fixed cost = 40,000 37,500 = 2,500 This means that 2,500 less than the actual fixed cost has been charged to the finished products, thus this under-absorbed overhead must be deducted from the profit calculated. ABSORPTION AND MARGINAL COSTING (H) 3
4 Exemplar 1 Normal production equals actual production Consider the following information illustrating the manufacture of a single product. Selling price per unit 20 Variable cost per unit 12 Annual fixed cost 40,000 Normal production level 10,000 units Actual production level 10,000 units Sales 9,500 units The profit statement using absorption costing would appear as shown below. Profit statement using absorption costing Sales (note 1) 190,000 Variable costs (Note 2) 120,000 Fixed costs (Note 3) 40, ,000 Closing stock (Note 4) 8, ,000 Profit 38,000 Note 1 Sales 9500 units 20 = 190,000 Note 2 Variable costs 10, = 120,000 Note 3 Note 4 Fixed costs entered as actual figure Closing stock (units) = 10,000 9,500 = 500 units Closing stock valued at total cost per unit number of units Total cost per unit (TCpu) = Variable cost per unit (VCpu) + Fixed cost per unit (FCpu) Fixed cost per unit calculated on normal production level = 40,000 / 10,000 units = 4 per unit TCpu = = 16 Closing stock = 500 units 16 = 8,000 4 ABSORPTION AND MARGINAL COSTING (H)
5 Profit statement using marginal costing Sales (Note 1) 190,000 Variable costs (Note 2) 120,000 Closing stock (Note 5) 6, ,000 Contribution 76,000 Fixed cost 40,000 Profit 36,000 Note 5 Closing stock valued at variable cost per unit number of units Closing stock = = 6,000 As can be seen, the treatment of fixed costs has an influence on the valuation of closing stock and the eventual profit. The following table illustrates the differences. Absorption Marginal Closing stock 8,000 6,000 Profit 38,000 36,000 ABSORPTION AND MARGINAL COSTING (H) 5
6 Exercise 1 From the following data relating to three firms, prepare two statements each to show how profit is calculated using Absorption costing Marginal costing. Firm A Firm B Firm C Selling price per unit Variable cost per unit Annual fixed cost 60,000 20, ,000 Normal production level (units) 20,000 5,000 60,000 Actual production level (units) 20,000 5,000 60,000 Sales (units) 18,500 4,200 57,500 6 ABSORPTION AND MARGINAL COSTING (H)
7 Exercise 1 Solution Firm A Profit statement using absorption costing Sales 462,500 Variable costs 300,000 Fixed costs 60, ,000 Closing stock (Note 1) 27, ,000 Profit 129,500 Profit statement using marginal costing Sales 462,500 Variable costs 300,000 Closing stock (Note 2) 22, ,500 Contribution 185,000 Fixed costs 60,000 Profit 125,000 Note 1 Fixed costs/output = 60,000/20,000 units = 3 per unit TCpu = VCpu + FCpu = = 18 Closing stock (units) = Production Sales = 20,000 18,500 = 1,500 1, = 27,000 Note 2 Closing stock (units) VCpu = 1, = 22,500 ABSORPTION AND MARGINAL COSTING (H) 7
8 Firm B Profit statement using absorption costing Sales 42,000 Variable costs 20,000 Fixed costs 20,000 40,000 Closing stock (Note 1) 6,400 33,600 Profit 8,400 Profit statement using marginal costing Sales 42,000 Variable costs 20,000 Closing stock (Note 2) 3,200 16,800 Contribution 25,200 Fixed costs 20,000 Profit 5,200 Note 1 Fixed costs/output = 20,000/5,000 units = 4 per unit TCpu = VCpu + FCpu = = 8 Closing stock (units) = Production Sales = 5,000 4,200 = = 6,400 Note 2 Closing stock (units) VCpu = = 3,200 8 ABSORPTION AND MARGINAL COSTING (H)
9 Firm C Profit statement using absorption costing Sales 690,000 Variable costs 480,000 Fixed costs 120, ,000 Closing stock (Note 1) 25, ,000 Profit 115,000 Profit statement using marginal costing Sales 690,000 Variable costs 480,000 Closing stock (Note 2) 20, ,000 Contribution 230,000 Fixed costs Profit 110,000 Note 1 Fixed costs/output = 120,000/60,000 units = 2 per unit TCpu = VCpu + FCpu = = 10 Closing stock (units) = Production Sales = 60,000 57,500 = 2,500 2, = 25,000 Note 2 Closing stock (units) VCpu = 2,500 8 = 20,000 ABSORPTION AND MARGINAL COSTING (H) 9
10 Exemplar 2 Under and over-absorption of overheads OTR plc sets up as a manufacturing business in Aberdeen. The selling price of its single product is 25 per unit. Direct material costs are 4 per unit and the direct labour costs are 11 per unit. Annual fixed costs are 50,000 for a normal production level of 10,000 units. The following information relates to production and sales for Year 1 and Year 2. Year 1 Year 2 Production (units) 11,500 9,500 Sales (units) 10,000 10,500 You are required to prepare statements showing the valuation of stock and the profit figures for Years 1 and 2 using: Absorption costing Marginal costing. 10 ABSORPTION AND MARGINAL COSTING (H)
11 Profit statement using absorption costing Year 1 Year 2 Sales (Note 1) 250, ,500 Opening stock 30,000 Variable costs (Note 2) 172, ,500 Fixed costs (Note 3) 57,500 47, , ,000 Closing stock (Note 4) 30, ,000 10, ,000 50,000 52,500 Over/(under)-absorbed (Note 5) 7,500 (2,500) Profit 57,500 50,000 Note 1 Sales Year 1 = 10,000 units 25 = 250,000 Year 2 = 10,500 units 25 = 262,500 Note 2 Variable costs Year 1 = 11,500 units ( ) = 172,500 Year 2 = 9,500 units ( ) = 142,500 Note 3 Fixed costs Fixed cost per unit = 50,000/10,000 = 5 Fixed cost charged to production in Year 1 = 11,500 5 = 57,500 Fixed cost charged to production in Year 2 = 9,500 5 = 47,500 Note 4 Closing stock Year 1 = (11,500 10,000) ( ) = 30,000 Year 2 = (1, ,500 10,500) 20 = 10,000 Note 5 Over/under-absorption of overheads Year 1 = 57,500 50,000 = 7,500 over-absorbed Year 2 = 50,000 47,500 = 2,500 under-absorbed ABSORPTION AND MARGINAL COSTING (H) 11
12 Profit statement using marginal costing Year 1 Year 2 Sales (Note 1) 250, ,500 Opening stock 22,500 Variable costs (Note 2) 172, , , ,000 Closing stock (Note 6) 22, ,000 7, ,500 Contribution 100, ,000 Fixed costs 50,000 50,000 Profit 50,000 55,000 Note 6 Closing stock Year 1 = 1, = 22,500 Year 2 = = 7, ABSORPTION AND MARGINAL COSTING (H)
13 Exercise 2 PLK plc sets up as a manufacturing business in Dundee. The selling price of its single product is 30 per unit. Direct material costs are 6 per unit and the direct labour costs are 10 per unit. Annual fixed costs are 80,000 for a normal production level of 20,000 units. The following information relates to production and sales for Year 1 and Year 2. Year 1 Year 2 Production (units) 19,000 20,500 Sales (units) 18,000 19,500 You are required to prepare statements showing the valuation of stock and the profit figures for Year 1 and Year 2 using: Absorption costing Marginal costing. Exercise 3 Annie Hall plc sets up as a manufacturing business in Kirkcaldy. The selling price of her single product is 10 per unit. Direct material costs are 3 per unit and the direct labour costs are 2 per unit. Annual fixed costs are 100,000 for a normal production level of 50,000 units. The following information relates to production and sales for Year 1 and Year 2. Year 1 Year 2 Production (units) 48,000 52,000 Sales (units) 47,000 52,500 You are required to prepare statements showing the valuation of stock and the profit figures for Year 1 and Year 2 using: Absorption costing Marginal costing. ABSORPTION AND MARGINAL COSTING (H) 13
14 Exercise 2 Solution Profit statement using absorption costing Year 1 Year 2 Sales 540, ,000 Opening stock 20,000 Variable costs 304, ,000 Fixed costs 76,000 82, , ,000 Closing stock 20, ,000 40, , , ,000 (Under)/Over-absorbed overheads (4,000) 2,000 Profit 176, ,000 Profit statement using marginal costing Year 1 Year 2 Sales 540, ,000 Opening stock 16,000 Variable costs 304, , , ,000 Closing stock 16, ,000 32, ,000 Contribution 252, ,000 Fixed costs 80,000 80,000 Profit 172, , ABSORPTION AND MARGINAL COSTING (H)
15 Exercise 3 - Solution Profit statement using absorption costing Year 1 Year 2 Sales 470, ,000 Opening stock 7,000 Variable costs 240, ,000 Fixed costs 96, , , ,000 Closing stock 7, ,000 3, , , ,500 (Under)/Over-absorbed overheads (4,000) 4,000 Profit 137, ,500 Profit statement using marginal costing Year 1 Year 2 Sales 470, ,000 Opening stock 5,000 Variable costs 240, , , ,000 Closing stock 5, ,000 2, ,500 Contribution 235, ,500 Fixed costs 100, ,000 Profit 135, ,500 ABSORPTION AND MARGINAL COSTING (H) 15
16 Exemplar 3 Using overhead absorption rates Thompson and Burnett are a manufacturing partnership. During Year 1 the following information becomes available. Sales 800,000 Costs Direct material 250,000 Direct labour ( 12 per labour hour) 240,000 Variable production overheads 150,000 Fixed production overheads 124,000 Fixed selling and distribution expenses 25,000 Information regarding opening and closing stock is as follows: Direct Direct Variable Fixed Material Labour Production Production Overhead Overhead 1 Jan 60,000 36,000 18,000? 31 Dec 75,000 48,000 35,000? Fixed overheads are recovered at 6 per direct labour hour. You are required to prepare two profit statements using: Absorption costing Marginal costing. 16 ABSORPTION AND MARGINAL COSTING (H)
17 Profit statement for Year 1 using absorption costing Sales 800,000 Opening stock (Note 1) 132,000 Direct material 250,000 Direct labour 240,000 Variable production overhead 150,000 Fixed production overhead (Note 2) 120, ,000 Closing stock (Note 3) 182, ,000 90,000 Less under-absorbed overhead (Note 4) 4,000 86,000 Fixed selling and distribution expenses 25,000 Profit 61,000 Note 1 Number of labour hours charged to opening stock = 36,000/12 = 3,000 Fixed overhead charged to opening stock = 3,000 6 per hour = 18,000 Valuation of stock = 60, , , ,000 = 132,000 Note 2 Fixed overhead charged to production. Number of labour hours worked = 240,000/ 12 = 20,000 Fixed overhead charged to production = 20,000 6 = 120,000 Note 3 Number of labour hours charged to closing stock = 48,000/12 = 4,000 Fixed overhead charged to closing stock = 4,000 6 per hour = 24,000 Valuation of stock = 75, , , ,000 = 182,000 Note 4 Under-absorbed overhead = 124, ,000 = 4,000 ABSORPTION AND MARGINAL COSTING (H) 17
18 Profit statement for Year 1 using marginal costing Sales 800,000 Opening stock (Note 5) 114,000 Direct material 250,000 Direct labour 240,000 Variable production overhead 150, ,000 Closing stock (Note 6) 158, ,000 Contribution 204,000 Fixed production overheads 124,000 Fixed selling and distribution expenses 25, ,000 Profit 55,000 Note 5 Valuation of stock = 60, , ,000 = 114,000 Note 6 Valuation of stock = 75, , ,000 = 158, ABSORPTION AND MARGINAL COSTING (H)
19 Exercise 4 Telfer and Burrows are a manufacturing partnership. During Year 1 the following information becomes available. Sales 600,000 Costs Direct material 175,000 Direct labour ( 10 per labour hour) 180,000 Variable production overheads 90,000 Fixed production overheads 75,000 Fixed selling and distribution expenses 45,000 Information regarding opening and closing stock is as follows. Direct Direct Variable Fixed Material Labour Production Production Overhead Overhead 1 Jan 15,000 18,000 12,000? 31 Dec 30,000 24,000 20,000? Fixed overheads are recovered at 4 per direct labour hour. You are required to prepare two profit statements using: Absorption costing Marginal costing. ABSORPTION AND MARGINAL COSTING (H) 19
20 Exercise 4 Solution Profit statement for Year 1 using absorption costing Sales 600,000 Opening stock (Note 1) 52,200 Direct material 175,000 Direct labour 180,000 Variable production overhead 90,000 Fixed production overhead (Note 2) 72, ,200 Closing stock (Note 3) 83, , ,400 Less under-absorbed overhead (Note 4) (3,000) 111,400 Fixed selling and distribution expenses 45,000 Profit 66,400 Note 1 Number of labour hours charged to opening stock = 18,000/ 10 = 1,800 Fixed overhead charged to opening stock = 1,800 4 = 7,200 Valuation of stock = 15, , , ,200 = 52,200 Note 2 Fixed overhead charged to production Number of labour hours worked = 180,000/ 10 = 18,000 Fixed overhead charged to production = 18,000 4 = 72,000 Note 3 Number of labour hours charged to closing stock = 24,000/ 10 = 2,400 Fixed overhead charged to closing stock = 2,400 4 = 9,600 Valuation of stock = 30, , , ,600 = 83,600 Note 4 Under-absorbed overhead = 75,000 72,000 = 3, ABSORPTION AND MARGINAL COSTING (H)
21 Profit statement for Year 1 using marginal costing Sales 600,000 Opening stock 45,000 Direct material 175,000 Direct labour 180,000 Variable production overhead 90, ,000 Closing stock 74, ,000 Contribution 184,000 Fixed production overheads 75,000 Fixed selling and distribution expenses 45, ,000 Profit 64,000 ABSORPTION AND MARGINAL COSTING (H) 21
22 Exemplar 4 Calculating sales volume and value Compo PLC produces a new type of compost for use in domestic greenhouses. The following information relates to Year 1 and Year 2 during which time all unit costs and revenues remained constant. Annual fixed costs of production were 95,000. The compost was sold in 50 litre bags at 50 per bag. Variable costs of production which were constant over the 2 years are: Per litre Materials 0.33 Variable overhead 0.12 Labour 0.20 Production data litres produced Year 1 900,000 Year 2 1,000,000 Stock data 1 January Year 1 50,000 1 January Year 2 75, December Year 2 25,000 The production budget shows a normal level of activity of 950,000 litres per annum. You are required to calculate for both years: total sales value (assume no wastage) total variable costs charged to production (c) (i) the fixed overhead absorption rate based on the normal level of activity 22 ABSORPTION AND MARGINAL COSTING (H)
23 (ii) (iii) total fixed costs charged to production the value of over- or under-absorption of fixed costs (d) (e) opening and closing stock values for use in (i) absorption cost accounts (ii) marginal cost accounts the profit or loss earned (i) using absorption costing (ii) using marginal costing. ABSORPTION AND MARGINAL COSTING (H) 23
24 Selling price per litre = 50/50 = 1 per litre Sales volume (litres) Year 1 Year 2 Opening stock 50,000 75,000 Production 900,000 1,000, ,000 1,075,000 Closing stock 75,000 25,000 Sales 875,000 1,050,000 Sales Year 1 = 875,000 1 = 875,000 Sales Year 2 = 1,050,000 1 = 1,050,000 Total variable costs charged to production Year 1 = 900,000 65p = 585,000 Total variable costs charged to production Year 2 = 1,000,000 65p = 650,000 (c) (i) Fixed overhead absorption rate = 95,000/950,000 = 10p per litre (ii) Fixed costs charged to production Year 1 = 900,000 10p = 90,000 Fixed costs charged to production Year 2 = 1,000,000 10p = 100,000 (iii) Under-absorbed overhead Year 1 = 95,000 90,000 = 5,000 (under) Over-absorbed overhead Year 2 = 95, ,000 = 5,000 (over) (d) Opening and closing stock values (i) Absorption costing Total cost per unit = Variable cost per unit + Fixed cost per unit = 65p + 10p = 75p 1 January Year 1 = 50,000 75p = 37, December Year 1 = 75,000 75p = 56, December Year 2 = 25,000 75p = 18, ABSORPTION AND MARGINAL COSTING (H)
25 (ii) Marginal costing 1 January Year 1 = 50,000 65p = 32, December Year 1 = 75,000 65p = 48, December Year 2 = 25,000 65p = 16,250 (e) (i) Profit statement using absorption costing Year 1 Year 2 Sales 875,000 1,050,000 Opening stock 37,500 56,250 Variable costs 585, ,000 Fixed costs 90, , , ,250 Closing stock 56, ,250 18, , , ,500 Less under-absorbed 5,000 Add over-absorbed 5,000 Profit 213, ,500 (ii) Profit statement using marginal costing Year 1 Year 2 Sales 875,000 1,050,000 Opening stock 32,500 48,750 Variable costs 585, , , ,750 Closing stock 48, ,750 16, ,500 Contribution 306, ,500 Fixed costs 95,000 95,000 Profit 211, ,500 ABSORPTION AND MARGINAL COSTING (H) 25
26 Exercise 5 Rosie Paterson set up a micro-brewery on 1 January Year 1 to produce beers to sell in Scotland. She has provided the following information relating to the year ended 31 December Year 1, when sales and production levels were 300,000 litres. Rosie Paterson has also estimated that there will no cost changes over the next 2 years. The normal level of activity in the brewery is 300,000 litres per annum. Sales 1,200,000 Production costs Direct materials 240,000 Direct labour 300,000 Variable overheads 48,000 Fixed production overhead 240, ,000 Net profit 372,000 Projected figures for the next 2 years are: Year 2 Year 3 Sales (in litres) 290, ,000 Production (in litres) 330, ,000 There was no opening stock at the beginning of Year 2. You are required to prepare statements showing the profits for Years 2 and 3 using: Absorption costing Marginal costing. 26 ABSORPTION AND MARGINAL COSTING (H)
27 Exercise 5 Solution Profit statement using absorption costing Year 2 Year 3 Sales 1,160,000 1,220,000 Opening stock 110,400 Direct materials (Note 2) 264, ,000 Direct labour (Note 3) 330, ,000 Variable overheads (Note 4) 52,800 44,800 Fixed costs (Note 5) 264, , , ,200 Closing stock (Note 6) 110, ,400 41, , , ,200 Less under-absorbed (16,000) Add over-absorbed 24,000 Profit 383, ,200 Profit statement using marginal costing Year 2 Year 3 Sales 1,160,000 1,220,000 Opening stock 78,400 Direct materials 264, ,000 Direct labour 330, ,000 Variable overheads 52,800 44, , ,200 Closing stock (Note 7) 78, ,400 29, ,800 Contribution 591, ,200 Fixed costs 240, ,000 Profit 351, ,200 ABSORPTION AND MARGINAL COSTING (H) 27
28 Note 1 calculation of unit costs Direct materials 240,000/300,000 litres = 80p per litre Direct labour 300,000/300,000 litres = 1 per litre Variable overheads 48,000/300,000 litres = 16p per litre Fixed production overheads 240,000/300,000 litres = 80p per litre Note 2 direct materials Year 2 Year 3 Production cost per unit 330,000 80p 280,000 80p 264, ,000 Note 3 direct labour Year 2 Year 3 Production unit rate 330, , , ,000 Note 4 variable overheads Year 2 Year 3 Production unit rate 330,000 16p 280,000 16p 52,800 44,800 Note 5 fixed costs Year 2 Year 3 Production cost per unit 330,000 80p 280,000 80p 264, , ABSORPTION AND MARGINAL COSTING (H)
29 Note 6 closing stock (units) Year 2 Year 3 Opening stock - 40,000 + Production 330, , , ,000 Sales 290, ,000 40,000 15,000 Closing stock (value) Units TCpu 40, * 15, ,400 41,400 Note 7 closing stock (value) * (80p p + 80p) Units VCpu 40, * 15, ,400 29,400 * (80p p) ABSORPTION AND MARGINAL COSTING (H) 29
30 Exercise 6 Carglass plc produces windscreens for cars at a standard selling price of 75 per unit. You are given the following anticipated figures for Years 2 and 3. Fixed costs of production for a normal year are 150,000 and normal production is 15,000 units. Variable costs per unit are: Direct materials 20 Direct labour 15 Variable overheads 10 Production data: Units produced Year 2 16,000 Year 3 15,500 Stock data: Date Units 31 December Year 1 1,000 1 January Year 3 1, December Year 3 1,200 You are required to prepare statements showing the profits for Years 2 and 3 using: Absorption costing Marginal costing. 30 ABSORPTION AND MARGINAL COSTING (H)
31 Exercise 6 Solution Profit statement using absorption costing Year 2 Year 3 Sales (Note 1) 1,162,500 1,185,000 Opening stock (Note 2) 55,000 82,500 Direct materials (Note 3) 320, ,000 Direct labour (Note 4) 240, ,500 Variable overheads (Note 5) 160, ,000 Fixed costs (Note 6) 160, , , ,000 Closing stock (Note 7) 82, ,500 66, , , ,000 Less under-absorbed Add over-absorbed 10,000 5,000 Profit 320, ,000 Profit statement using marginal costing Year 2 Year 3 Sales 1,162,500 1,185,000 Opening stock (Note 8) 45,000 67,500 Direct materials 320, ,000 Direct labour 240, ,500 Variable overheads 160, , , ,000 Closing stock (Note 8) 67, ,500 54, ,000 Contribution 465, ,000 Fixed costs 150, ,000 Profit 315, ,000 ABSORPTION AND MARGINAL COSTING (H) 31
32 Year 2 Year 3 Note 1 sales (units) Opening stock 1,000 1,500 + Production 16,000 15,500 17,000 17,000 Closing stock 1,500 1,200 15,500 15,800 Sales ( s) 1,162,500 1,185,000 Note 2 closing stock (units) 1,000 1,500 Value (VCpu + FCpu) 1,000 ( ) 1, ,000 82,500 Note 3 direct materials 16, , , ,000 Note 4 direct labour 16, , , ,500 Note 5 variable overheads 16, , , ,000 Note 6 fixed costs 16,000 10* 15, , ,000 * ( 150,000/15,000) Note 7 closing stock 1, (TCpu) 1, ,500 66,000 Note 8 opening stock 1, (VCpu) 1, ,000 67,500 Note 9 closing stock 1, (VCpu) 1, ,500 54, ABSORPTION AND MARGINAL COSTING (H)
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