CSTR - absorption and marginal costing

laurenamy94xx

Please can someone help with the below - its a question from sample assessment 1 2013

Broadsword LTs uses both batch and unit costing, as appropriate, in it's plastic moulding department it is currently costing a new product, RN36B, which will start production in batches of 76000 units.
It has estimated that the following costs will be in cured in producing one batch of 76000 units of RN36B

Product RN36B per batch:
Direct materials 2080
Direct labour 3810
Variable overheads 2470
Fixed manufacturing overheads 4560
Fixed administration, selling and distribution costs 2280
Total costs 15200

I have to now work out:
The total cost of one unit =
The full absorption cost of one unit =
The marginal cost of one unit =
The full absorption cost of a batch =
The marginal cost of a batch =
Many thanks Lauren

ariadne

I'm not going to answer the question (I don't have my notes or a calculator and it's better to work through it yourself) but I'll explain how I studied for this as I asked a question about the difference between absorbtion and marginal costing and no one answered.

Absorbtion, I seem to recall, is all the variable and the fixed costs.
So Materials, Labour, Variable Overheads and Fixed Overheads = Absorbtion costing
Each product carries part of the fixed cost incurred when making them.

Marginal costs are all the variable costs but fixed costs are added later.
So Materials, Labour and Variable Costs = Marginal costing
Fixed costs are called period costs and are assigned to the time period not to the products made in the period. This makes more difference when there is a closing inventory of finished/part made goods.

Neither include admin, distrubution, advertising etc. This is a common error mentioned in the feedback.

I watched a YouTube video to explain this, it was for ACCA but it is the same principle.

laurenamy94xx

Thank you I would just like to let you know I passed my exam this morning, completing my level 3