Beans manufactures a single product, details of which are as follows. Per unit $ Selling price...

Beans manufactures a single product, details of which are as follows.

Per unit	$
Selling price	700
Direct Materials	90
Direct labour	120
Variable overheads	200

Annual fixed production overheads are budgeted to be $10 million and the company expects to produce 200,000 units each year. Overheads are absorbed on a per unit basis.

Fixed operational expenses for the quarter are as follows

· Selling costs $400,000

· Administrative costs $1,500,000

· Distribution costs $600,000

Actual stock data for quarter of 2020 are given below.

	January – March
Sales	48,000
Production	42,000
Closing stock	3,000

Required-

a. Calculate Opening stock.

b. Prepare a Marginal Costing Statement.

c. Prepare an Absorption Costing Statement.

d. Reconcile profit figures from both statements.

Expert Solution



a) Calculation of Opening stock
Opening Stock=Sales-Production+closing stock
=48000-42000+3000
=9000 units

b) Statement Of Marginal Cost statement
Particulars	Amount in $	Amount in $
Sales(48000 units*700) (A)		33600000
Less: Cost of Production (B)

Direct material(42000*90)	3780000
Direct Labour(42000*120)	5040000
Variable Overheads(42000*200)	8400000
	17220000

Add:Opening Stock 9000units
Value=No of units* Variable Cost per unit
=9000units(Direct material cost $90+Direct Labour Cost $120+Variable overhead cost $200)
=9000*410	3690000

	20910000
Less: Closing Stock:3000 units
Value=No of units* Variable Cost per unit
=3000*410	1230000	19680000

Total Contribution(A-B)		13920000
Less Fixed cost (D)
Production overheads(Per quarter) (10000000/4)	2500000
Selling cost	400000
Administrative Cost	1500000
Distribution cost	600000	5000000
Profit (C-D)		8920000


d) Statement Of Absorption Cost statement
Particulars	Amount in $	Amount in $
Sales(48000 units*700) (A)		33600000
Less: Cost of Production (B)

Direct material(42000*90)	3780000
Direct Labour(42000*120)	5040000
Variable Overheads(42000*200)	8400000
Fixed Overhead recovered(42000units*10000000/200000 units)	2100000
	19320000
Add:Opening Stock 9000units
Value=No of units* (Variable Cost per unit+Fixed cost per unit)
=9000units(Direct material cost $90+Direct Labour Cost $120+Variable overhead cost $200+ Fixed cost $50)
=9000*460	4140000

	23460000
Less: Closing Stock:3000 units
Value=No of units* Valued at Current Cost
=3000*(19320000/42000)	1380000
	22080000

Under overabsorption of Fixed Cost(2500000-2100000)	400000	22480000

Gross profit(A-B)		11120000
Less Other Fixed cost (D)
Selling cost	400000
Administrative Cost	1500000
Distribution cost	600000	2500000
Profit (C-D)		8620000



d) Statement Of Reconcilation
Particulars		Amoun in $
Profit as per Marginal Costing Statement		8920000
Less: Under of opening Stock (4140000-3690000)		450000
Add: Under value of Closing Stock 1380000-1230000)		150000
Profit as per absorption Costing Statement		8620000

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