Marginal Costing Statement (Cambridge (CIE) AS Accounting): Revision Note
Exam code: 9706
Costing statements using marginal costing
How do I prepare a marginal costing statement?
A marginal costing statement shows the contribution
STEP 1
Calculate sales revenue
Selling price per unit × sales volume
STEP 2
Calculate direct material cost
STEP 3
Calculate direct labour cost
STEP 4
Calculate other variable costs
E.g. royalties, indirect factory materials
STEP 5
Calculate contribution
Subtract variable costs from sales revenue
STEP 6
Calculate fixed costs
Fixed costs include costs that don't change with production volume
E.g. factory rent, factory machinery depreciation
STEP 7
Calculate profit for the month
Subtract fixed costs from contribution
Worked Example
The following data is available for the year ended 31 March 2018.
$ | |
|---|---|
Sales revenue | 47 000 |
Direct materials | 15 000 |
Direct labour | 11 000 |
Other variable costs | 5 000 |
Factory rent | 10 000 |
Factory machinery depreciation | 4 000 |
Prepare a marginal costing statement for the month to calculate the profit for the month.
Answer:
Identify the variable and fixed costs:
Variable:
Direct materials, direct labour, other variable costs
Fixed:
Factory rent, factory machinery depreciation
$ | |
|---|---|
Revenue | 47 000 |
Direct materials | (15 000) |
Direct labour | (11 000) |
Other variable costs | (5 000) |
Contribution | 16 000 |
Less fixed costs | (14 000) |
Profit for the month | 2 000 |
Profit for the month is $2 000
Unlock more, it's free!
Join the 100,000+ Students that ❤️ Save My Exams
the (exam) results speak for themselves:
Was this revision note helpful?
