Answer Q no.

1
1. Absorption Costing

Particulars Amount (Rs.)

Sale Price (20000*30) 600,000.00

Less VCOGS
DM 80,000.00
DL 100,000.00
VFOH 120,000.00
FFOH 72,000.00
COGM 372,000.00
Less Closing Stock
(24000-20000=4000*15.5) 62,000.00
COGS 310,000.00
Gross Profit 290,000.00
Less: Admin & Marketing Expenses
Fixed Marketing & Admin 60,000.00 60,000.00
Net Profit under Absoption Costing 230,000.00

2. Direct Costing

Particulars Amount (Rs.)

Sale Price (20000*30) 600,000.00

Less VCOGS
DM 80,000.00
DL 100,000.00
VFOH 120,000.00
VCOGM 300,000.00
Less Closing Stock
(24000-20000=4000*12.5) 50,000.00
VCOGS 250,000.00
Contribution Margin 350,000.00
Less: Fixed Expenses
Fixed FOH 72,000.00
Fixed Marketing & Admin 60,000.00 132,000.00
Net Profit under Direct Costing 218,000.00

Difference due to stock

Units Produced - Units Sold * Fixed FOH Rate
(24000 - 20000) * 3 12,000.00
Absoption Costing - Direct Costing
230000 - 218000 12,000.00

Answer Question # 2
Particulars Existing Plan New Plan
Sale price (100*100) 10,000.00 (110*90) 9,900.00
Less Variable Cost (100*70) 7,000.00 (110*70) 7,700.00
Contribution Margin 3,000.00 2,200.00
Less Fixed Cost 2,000.00 2,350.00
Net Profit 1,000.00 Net Loss -150.00

Note: Existing Plan is better as it gives profit