Marginal & Absorption costing – other variable cost ( based on sales unit)

This topic has 3 replies, 2 voices, and was last updated 11 years ago by John Moffat.

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January 1, 2015 at 11:28 am #221857
Molly Sum
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Why do the following exercises teaching needs to less other variable cost ? use AC & MC

MC
Sales ( 10,000 units ) 15,000
Less : COS
opn inventory 0.00
add : cost of prod 10,000
less : closing inv 5000 5000
————–
gross contribution 10000

less : other variable cost (based on sales unit) 1000
10,000 units —————-
total contribution 9000

less : prod. OH 6000
selling & admin 1000
—————-
net profit 2000

because I have one practices review question ,asked to find out the profit for AC & MC is not necessary to minus other variable cost based on sales units. please advise.
January 1, 2015 at 6:14 pm #221872
John Moffat
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Other variable costs do reduce the profit whether you are using absorption or marginal costing.
They do not affect inventory values, because inventory only includes production costs.
January 2, 2015 at 5:10 am #221886
Molly Sum
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possible show one example when questions asked about other variable cost ?
January 2, 2015 at 9:03 am #221895
John Moffat
Keymaster
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There are other variable costs (selling costs) in the example that I work through in the lecture. Inventory values only ever include production costs.
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