Question

b) Using the information provided below, calculate the closing stock valuations and the profit figures for Product Z under both Absorption Costing principles and Variable Costing principles. Product Z: Annual production (units) 31,000 Units sold during the period 25,000 Costs: Direct materials per unit €10 Direct labour per unit €21 Administration expenses for period €15,000 Overheads incurred: Power and maintenance (variable) €24,000 Other factory overheads (fixed) €36,000 Other information: Selling price per unit €40 Total machine hours per annum 12,000 hours Machine time per unit 1 hou

Answer 1

Units Produced		31000
Units sold		25000
Cost per unit
	Absorption	Variable
Direct Material per unit	10	10
Direct Labour per unit	21	21
Variable manufacturing overhead (24000/31000)	0.77	0.77
Fixed manufacturing overhead (36000/31000)	1.16
Total cost per unit	32.94	31.77
Closing stock Valuation (6000 x 32.94)(6000x31.77)	197613	190645
Profit
Sales	1000000	1000000
Cost of goods sold	823387
Variable cost of goods sold		794355
Gross Profit	176613
Contribution Margin		205645
Less:Fixed Cost
Fixed manufacturing overhead		36000
Administrative expenses	15000	15000
Operating Profit	161613	154645