Page 175 - F2 - MA Integrated Workbook STUDENT 2018-19

Absorption and marginal costing

Test your understanding 1

Consider a product with a variable cost per unit of $26 and selling price of
$42. Fixed costs for the period are $12,000.

(a) What is the contribution per unit for the product?

(b) If 1,000 units are sold, what is the total contribution?

(c) What is the total profit and profit per unit at this level of sales?

(d) Calculate the total profit and profit per unit for the following levels of
sales:

– 500 units

– 900 units

– 1,200 units

Test your understanding 2

For the forthcoming year, GHI’s variable costs are budgeted to be 60% of the
sales value and fixed costs are budgeted to be 10% of sales value.

If GHI increases its selling prices by 10%, but if fixed cost, variable costs per
unit and sales volume remain unchanged, the effect on GHI’s contribution
would be:

A a decrease of 2%

B an increase of 5%

C an increase of 10%

D an increase of 25%

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