Marginal and Absorption costs are as follows: Marginal (£) Absorption (£) 3 Direct wages Direct material 6 Variable production overhead 2 2 11 11 Fixed production overhead Unit cost 7 11 18 The actual production and sales relating to June and July are as follows: June units July units Sales 100 125 Production 110 130 The selling price per unit is £45 and the variable selling cost per unit is £4. There was no opening stock at the beginning of June. Required: (a) Calculate total profit for June and July using marginal costing. (b) Calculate total profit for June and July using absorption costing. (c) Explain why the profit calculated using Absorption Costing is higher than the profit calculated for Marginal Costing for the month of June.

Marginal and Absorption costs are as follows: Marginal (£) Absorption (£) 3 Direct wages Direct material 6 Variable production overhead 2 2 11 11 Fixed production overhead Unit cost 7 11 18 The actual production and sales relating to June and July are as follows: June units July units Sales 100 125 Production 110 130 The selling price per unit is £45 and the variable selling cost per unit is £4. There was no opening stock at the beginning of June. Required: (a) Calculate total profit for June and July using marginal costing. (b) Calculate total profit for June and July using absorption costing. (c) Explain why the profit calculated using Absorption Costing is higher than the profit calculated for Marginal Costing for the month of June.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...

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