- This topic has 12 replies, 2 voices, and was last updated 2 years ago by
.
- Posts
Sir i had this confusion, for standard contribution per unit i know we simply deduct all the variable costs from selling price
But for standard profit all the variable costs and fixed costs i know that but there are 2 types of fixed costs, fixed production and selling cost, are we going to include fixed selling cost as well? And then deducting them altogether from selling price?
And same for variable selling costs are we going to include that in both to calculate contribution and profit?
In calculating the standard cost we only include the production costs.
For the production of a management accountants profit statement we follow the layout that I explain in Chapters 9 and 10 of our lecture notes and my lectures working through the chapters.
Sir i just watched both of your lectures on this absorption and marginal costing, and one thing i didn’t get that is in marginal costing, first you deduct variable production costs from closing inventory when we do that, we get variable costs of sales and then you deducted that from sales and i thought it’s contribution, but sir again from that value you deduct variable cost of sales, why that?
In exam if in standard cost card they provide us with variable cost of sales and variable production cost are we supposed to deduct all of them from sales? To get contribution? Also sir if we already got variable cost of sales, why do we have to deduct closing inventory? As we do that only to find cost of sales, I’m confused here. could you please explain me that
The contribution is the sales less all variable costs.
The standard cost per unit of inventory in marginal costing is the total variable production cost.
We subtract the closing inventory from the variable cost of production so as to know the variable cost of sales.
Yes sir indeed we subtract closing inventory from variable cost of production to know variable cost of sales and then we deduct that from sales in order to obtain contribution but sir in that lecture you’re deducting variable cost of sales twice, that’s why I’m a bit confused, once we deduct variable cost of sales from sales that is contribution and then we deduct all the fixed costs to get profit
I do not deduct the variable cost of sales twice!!
I deduct the variable cost of sales and later I deduct the variable selling costs.
Check the lecture again (or study the printed answer in the lecture notes).
Oh okay sir sorry for being annoying, but those variable selling costs, at first if we deduct all the variable costs (production and selling) from selling cost we are going to get contribution, either that or if we deduct closing inventory from variable cost of production to get variable cost of sales and then deduct that from sales, isn’t that enough? That we have to further deduct variable selling cost as well? This is the only thing confusing me
Inventory is valued at the variable cost of production.
This is subtracted from the variable cost of production, which gives the variable production cost of what was sold, which is then subtracted from the revenue.Then we subtract the variable selling costs, which gives us the contribution.
And if we do the opposite? Like deduct all variable costs( selling and production) at the start both from sales, would that be enough? Or we would have to deduct closing inventory after that? The rest i got it sir
The correct layout is as shown in my lectures and so I do not understand why you should want to show it differently.
Fortunately you cannot be asked to produce a full statement, so if you end up with the correct figure that is all that matters.
- The topic ‘Standard costing’ is closed to new replies.