compute for the following:

Equivalent units for Materials is _____.

Cost per unit for labour is _____.

Closing WIP in USD is _____.

Cost of sales under absorption costing is _____.

Contribution margin is _____.

Net loss under marginal costing is _____. (Put positive amount.)

Problem:

7.2 Intermediate: Equivalent production and preparation of variable and absorption costing profit statements

A new subsidiary of a group of companies was established for the manufacture and sale of Product X. During the first year of operations 90 000 units were sold at 20 per unit. At the end of the year, the closing stocks were 8000 units in finished goods store and 4000 units in work-in-progress which were complete a regards material content but only half complete in respect of labour and overheads. You are to assume that there were no opening stocks. The work-in-progress account had been debited during the year with the following costs:

()

Direct materials 714 000 Direct labour 400 000 Variable overhead 100 000 Fixed overhead 350 000 Selling and administration costs for the year were:

Variable cost per unit sold Fixed cost () ()

Selling 1.50 200 000 Administration 0.10 50 000 The accountant of the subsidiary company had prepared a profit statement on the absorption costing principle which showed a profit of 11 000. The financial controller of the group, however, had prepared a profit statement on a marginal costing basis which showed a loss. Faced with these two profit statements, the director responsible for this particular subsidiary company is confused.