Question

manutacturer produces 2,00,000 units of a product at a cost of Rs. 3.25 per unit later on he produces 2,75,000 units at a cost of Rs. 3.20
when les fixed overheads have increased by 10% find out the marginal cost per unit and original fixed overheads.​

Answer 1

Explanation:

SOLUTION

Solution to the given issue can be presented as:

Under Marginal Costing Under absorption Costing

No. Of Units sold 450 450

Sales @ Rs.8 Per Units Rs.3600 Rs.3600

Variable Cost @ Rs.5 P/U Rs.2250 Rs.2250

Fixed Cost Rs. 900 Rs, 675 *

Profit Rs.450 Rs.675

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* Fixed Cost Rs.900 for 600 units. Proportionate Fixed cost for 450 units Rs.900/600*450 i.e Rs.675.

It is evident that higher profit is reported under absorption costing method by Rs.225.