BA 2 - Marginal and absorption costing. Quantia Learning
,01. EFG manufactures a number of household electrical products. Details of its best-selling
kettle and toaster are given below:
Kettle Toaster
Direct material per unit $8.50 $9.00
Direct labour hours per unit 1.5 1.8
Machine hours per unit 0.6 0.4
The following additional information on overheads is given:
Absorbed:
Variable production overheads $2.70 per machine hour
Fixed production overheads $4.20 per labour hour
Variable non-production overheads $1.50 per labour hour
Fixed non-production overheads $3.00 per unit
In addition a royalty of $2.50 per unit is paid to the designer of the kettle. Direct labour is paid
$10 per hour.
Which of the following statements is correct?
A. The marginal cost of a kettle is $27.37 and the marginal cost of a toaster is $30.78
B. The marginal cost of a kettle is $29.87 and the marginal cost of a toaster is $30.78
C. The marginal cost of a kettle is $33.92 and the marginal cost of a toaster is $35.64
D. The marginal cost of a kettle is $39.17 and the marginal cost of a toaster is $41.34
BA 2 - Marginal and absorption costing. Quantia Learning
, 02. Consider a product with a variable cost per unit of $26 and selling price of $42. Fixed costs
for the period are $12,000.
Required:
A. What is the contribution per unit for the product?
B. If 1,000 units are sold, what is the total contribution?
C. What is the total profit and the profit per unit at this level of sales?
D. Calculate the total profit for the following levels of sales: – 500 units – 900 units – 1,200
units
E. Calculate the contribution per unit and profit per unit for each level of sales.
03.
A. In a period where opening inventory was 5,000 units and closing inventory was 3,000 units,
a company had a profit of $92,000 using absorption costing.
If the fixed overhead absorption rate was $9 per unit, calculate the profit using marginal
costing.
B. When opening inventory was 6,750 litres and closing inventory was 8,500 litres, a company
had a profit of $62,100 using marginal costing.
The fixed overhead absorption rate was $3 per litre. Calculate the profit using absorption
costing.
04. A company has calculated its marginal cost of production for its best selling product as $50
per unit and its full cost of production as $85 per unit.
Which two of the following statements are true?
BA 2 - Marginal and absorption costing. Quantia Learning
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