7.2 comparative income statements
PREPARATION OF MARGINAL AND ABSORPTION STATEMENTS
Cost of production and profit determination
Marginal Costing
Profit and Loss Statement
| Sales
Less: Cost of sales Opening stock Add: production cost D. Material D. Labour V. Production O/H
Less: Closing stock Gross contribution Less: Other various costs Net Contribution Less: Fixed costs Production Administration Selling and distr. N. Profit |
xxx
xxx xxx xxx xxx (xxx)
xxx xxx xxx |
xxx
(xxx) xxx xxx
(xxx) xxx |
Absorption costing
Profit and loss statement
| Sales
Less: Cost of sales Opening stock Add: production cost D. Material D. Labour V. Production O/H I. Production O/H
Less: Closing stock Gross Profit Less: Operating expenses Administration Selling and distr. Net Profit |
xxx
xxx xxx xxx xxx xxx (xxx)
xxx xxx
|
xxx
(xxx) xxx
(xxx) xxx |
Dacom ltd makes phones, for which the budgeted profit per unit is as follows:
| Items per unit | $ |
| Materials | 2 |
| Labour | 3 |
| Variable production overhead | 3 |
| Fixed production overhead | 4 |
| Variable selling cost | 1 |
| Fixed selling overhead | 2 |
| Profit | 5 |
Selling price per unit 20
Both types of fixed overheads were based on a budget of 10,000 phones a year.
In the first year of production, the only difference from the budget was that Dacom ltd produced
11,000 phones and sold 9,000. All costs and revenues were in line with the levels budgeted per unit.
Required
determine net profit under:
- Variable costing
- Full costing
- reconciliation statement for the profit calculated in a. i) and ii) above
