Marginal costing and absorption costing

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Reference no: EM131562229

The following data have been provided by the planning department of Elegant Company Limited for 2006.

Sales per unit Rs 200, Variable Manufacturing cost(Per unit): Direct Material Rs 18, Direct Labour Rs 15, Factory Overhead Rs 10. Fixed Manufacturing Overhead Rs 250,000, Fixed Selling&Distribution cost Rs 110,000, Variable Selling&Distribution cost(Per unit)Rs 10, Administrative expense variable Rs 15 per unit and fixed administrative expense fixed Rs 220,000.

There were 100 units at beginning inventory however during the year 8,000 units were produced and 7,900 units were sold. Budgeted production 8,000 units Direct labor wage was increased by 50% with effect from 01.01.2006. Company follows FIFO method to value stock.

Requirements:

Compute Profit/Loss under:

A. Marginal costing and Absorption costing

B. Reconcile the difference between absorption&marginal costing income.

Reference no: EM131562229

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