Question

Question 1

Maxxa Limited manufactures one product, the Maxx. For the month of January 2019, the following information is available:

Number of units manufactured	4,000
Number of units sold	3,000
Selling price	RM8 per unit
Direct materials for month	RM5,000
Direct labour for month	RM9,000
Fixed production overheads for month	RM6,000

There was no finished goods inventory at the start of the month. Both direct materials and direct labour are variable costs.

Required:

You are produce Statement of Profit or Loss using marginal costing and absorption costing methods.

Answer 1

Marginal costing

Sales (3,000 * 8) = 24,000

Less: Variable cost.

Direct materials = (5,000)

Direct Labor = (9,000)

Contribution Margin = 10,000

Fixed production overhead = (6,000)

Net Profit = 4,000

Absorption costing.

Direct materials = 5,000

Direct Labor = 9,000

Fixed production overhead = 6,000

Total cost of goods manufactured = 20,000

Cost per unit = 20,000 / 4000 = 5

Less: Ending Inventory (4000 - 3000) *5 = (5,000)

Cost of goods sold = 15,000

Sales (3,000 * 8) = 24,000

Net profit = 9,000