Stock valuation statements

Question 1

What does the profit statement look like using mariginal costing? (stock valuation)

Answer 1

Sales (selling pricex no of units sold)
Opening stock (variable cost x no of units)
Add variable production costing (variable cost x units produced)
Less closing stock (variable cost x no of units)
= Cost of sales
Contribution ( sales-cost of sales)
Less manufacturing fixed costs
= Gross profit
Less other fixed costs
= Net profit

Question 2

What does the profit statement look like using absorption costing? (stock valuation)

Answer 2

Sales (selling price x number of units sold)
Opening stock (variable cost+ absorption rate= fixed cost divided by output)
Add production cost (variable cost+manufacturing fixed costs)
Less closing stock (variable cost+ absorption rate x number of units)
=Cost of sales
=Gross profit
Less other fixed costs
Add over absorption minus under
=Net profit