Question

A company that manufactures a single product supplied the following budgeted details: Budgeted production and factory overheads costs were 3 000 units and N$15 000, respectively. selling price per unit is N$150, variable cost per unit: Direct material N$30, Direct labour N$ 40, Variable overheads N$20, fixed overheads per month N$60 000. During the past month 3000 units were manufactured while only 600 units were on hand. The profit for the month according to the direct/marginal costing method was:

Answer 1

Income Statement (Marginal Costing)
Sales (N$150 * 2400 units)	360,000
Variable Production Costs:
Direct Material (N$30 * 3000 units)	90,000
Direct Labour (N$40 * 3000 units)	120,000
Variable Overheads (N$20 * 3000 units)	60,000
Total Variable Production Costs	270,000
Less: Closing stock (N$90 * 600 units)	54,000
Total Variable Costs	216,000
Contribution (Sales- Total Variable Costs)	144,000
Less: Fixed Costs -- Fixed Overheads (N$15,000+ N$60,000)	75,000
PROFIT	69,000

Working notes:

Closing stock will be valued at total variable cost, i.e., 20+40+30= N$90 per unit * 600 units.

Profit for the month will be N$69,000 using marginal costing method.