Problem:
The following data relate to a company which makes and sells computers.
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March 2009
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April 2009
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Production Volume
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10,000 units
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5,000 units
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Sales Volume
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5,000 units
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10,000 units
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Selling Price per unit
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Rs. 100
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Rs. 100
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Variable Production Cost per unit
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Rs. 50
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Rs. 50
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Fixed Production Overheads Incurred
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Rs. 1,00,000
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Rs. 1,00,000
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Fixed Production Overheads per unit, being predetermined
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Rs. 10
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Rs. 10
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Overhead Absorption rate
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|
|
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Selling, Distribution & Administration Cost (all fixed)
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Rs. 50,000
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Rs. 50,000
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You are required to present a Comparative Profit Statement for each month using: (i) Absorption Costing technique; and (ii) Marginal Costing technique. Comment on the following statement using the figures contained in your answer: (iii) Marginal Costing rewards sales whereas Absorption Costing rewards production.