UNIT 2: MAY 2012, QUESTION #2 (A)

WORKINGS:
The amount of units in closing stock is calculated as follows:
Opening units + Actual units produced – Actual units sold.
Therefore closing stock equals = 3,500 + 64,000 + 62,000 = 5,500 units.
 
Under Marginal costing each unit of orange juice will be valued at the variable cost of production. This is calculated as follows:
Total variable production cost divided by the number of actual units produced.
Variable cost per unit = $3,200,000/64,000 units = $50 per unit.
Therefore the value of the closing stock under marginal costing would be $50 x 5,500 unit = $275,000.
​
The value of the opening stock under marginal costing would be the total of opening inventory given  minus the value of the fixed production overheads included:
Therefore the opening stock = $210,000 - $35,000 = $175,000.

Now that all of the workings have been completed the Marginal Costing Income Statement of Aqualead for the year ended 31st March, 2011 can be prepared.

Below is the Absorption Costing Income Statement of Aqualead for the year ended 31st March, 2011. 

Now that the Absorption and Marginal Costing Income Statements have been prepared the reconciliation between the Net Operating Incomes calculated under each method can be completed.

I hope that you found this proposed solution helpful! If you did please share it! Also, feel free to ask any questions or to comment below. Best of luck!