Marginal costing pev june 06

Tina Sparkles

Hey

Can anyone please look at june 06 pev task 1.1 d. First of all can anyone explain marginal costing in english? i cant make any sense of it. i havent got a clue where any of the figures have come from in the answer.

Thanks xx

cs_1988

Hi Tina,

Marginal costing is basically P&L

Revenue,

Deduct All Variable Costs

= Contribution

Deduct all Fixed Costs and Fixed parts of semi variable costs

=Profit.

Does that Help?

Chris

Tina Sparkles

Ye it does thanks but im not sure how to do the operating question in the june 06 paper, where does the 240k come from? i hope to god marginal costing doesn't come up!

cs_1988

Hi Tina,

1.1d is a standard Cost Reconciliation, the 240 is the fixed overheads (budgeted) you calculated in the first question, plus variable costs for actual production.

Then you use the variances to get to your Actual cost,

It is quite an odd layout, i'm sure they wouldnt mark you down if you went straight in with 395,250!!

Chris

Tina Sparkles

right i see where that figure has come from now but why use the budgeted figure? its asking for standard actual cost t reconcile to actual cost?

cs_1988

Yeah i see what you mean, quite confused too!

Calling someone else to explain!!!

cs_1988

Ah, it's because it's marginal. So the fixed overheads don't change with production, so the budgeted is the standard in marginal!!!!