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Absorption and marginal costing

A company produced 3,000 units of their only product in the last period. The unit
costs of the product were:

$
Direct material 20
Direct labour 15

Variable production overhead 8
Fixed production overhead 11
–––
Standard production cost 54
–––

The sales for the period were 2,500 units at $85 per unit.

There were 50 units of opening inventory.

The fixed production overhead incurred in the last period was $30,000

Selling, distribution and administration expenses in the period are:

Fixed $5,000

Variable 10% of sales value

2.2 Marginal costing profit statement

$ $
Sales 212,500
Less Cost of sales:

Opening inventory 2,150
Variable cost of production 129,000
Less Closing inventory 23,650
107,500

Less Other variable costs 21,250
Contribution 83,750

Less fixed costs 35,000

Profit/loss 48,750

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