confronto

• marginal costing fixed production costs are treated as period costs and are written off as they are incurred
• absorption costing fixed production costs are absorbed into the cost of units and are carried forward in inventory to be charged against sales for the next period

calcolo

Dati

Per unit	$
Selling price	180.00
Direct materials	40.00
Direct labour	16.00
Variable overheads	10.00

• annual fixed production overheads are budgeted to be $1.6 million
• produce 1,280,000 units each year
• actual overheads are $1.6 million for the year
• budgeted fixed selling costs are $320,000 per quarter



• actual sales and production units for the first quarter of 20X8
• Sales 240,000
• Production 280,000

• marginal costing
• absorption costing

1. calculate the overhead absorption rate per unit
overhead absorption rate is based only on budgeted figures

Overhead absorption rate = Budgeted fixed overheads
                                                                               Budgeted units

Budgeted overheads (quarterly) = $1.6 million / 4 = $400,000
Budgeted production (quarterly) = 1,280,000 / 4 = 320,000 units

Overhead absorption rate per unit = $400,000 / 320,000 = $1.25 per unit




2. calculate total cost per unit
Total cost per unit (absorption costing) = Variable cost + fixed production cost = (40 + 16 + 10) + 1.25 = $67.25
Total cost per unit (marginal costing) = Variable cost per unit = $66




3. calculate closing inventory in units
Closing inventory = Opening inventory + production – sales
Closing inventory = 0 + 280,000 – 240,000 = 40,000 units




4. calculate under/over absorption of overheads
this is based on the difference between actual production and budgeted production

Actual production = 280,000 units
Budgeted production = 320,000 units (Budgeted production (quarterly))
Under-production = 40,000 units

absorption of overheads of 40,000 x $1.25 = $50,000




5. produce statements of profit or loss