Wednesday 5 December 2018

Marginal Costing vs Absorption Costing : Exercise

During 2018, Fadhil Works Inc had RM10,000 sales commission, RM2,000 in administrative costs of which RM800 is fixed. They sold 8,500 units and produced 10,000 units. Their selling price per unit was RM45, direct materials was RM10, direct labour RM7 and variable overhead was M3.50. fixed overhead amounted to RM7,500.

Prepare an income statement under Variable costing and Absorption costing.
Show the difference in net profit between the two methods.

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