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Income Statement For Year: 1 Using Absorption Costing Approach

The income statements show the revenues and costs of a company over 3 years using absorption costing. In year 1, the company had sales of £276,000 and net profit of £67,716. In year 2, sales increased to £368,000 and net profit was £101,162. While in year 3 sales decreased to £322,000, costs also reduced and net profit remained high at £78,313.

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127 views5 pages

Income Statement For Year: 1 Using Absorption Costing Approach

The income statements show the revenues and costs of a company over 3 years using absorption costing. In year 1, the company had sales of £276,000 and net profit of £67,716. In year 2, sales increased to £368,000 and net profit was £101,162. While in year 3 sales decreased to £322,000, costs also reduced and net profit remained high at £78,313.

Uploaded by

Mak Puss
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Income statement for Year : 1

Using Absorption Costing Approach


Number
ITEM of units £ P.U. AMOUNT £ AMOUNT £

SALES 3,000 92 276,000

MARGINAL COST OF SALES ,…….. ………. ………..

OPENING STOCK 0 0
ADD: VARIABLE PRODUCTION COST: ………… ……… ………..

Direct Material 3600 17 61200

Direct Labour 3600 11 39600

Variable Expenses 3600 7 25200

Fixed indirect production cost 84000

Total Production Cost A 210000


Less: Closing stock at end of year 1.
[Opening stock units+units produced -
units sold] use formula to calculate
amount. B 35000

Cost of SALES : A-B: 175000


Gross Profit: Sales - Cost of Sales : 101,000

Selling and Distribution Overheads 5700

Admin Overheads 10500 16200


Profit from operations Before Interest &
Tax (PBIT) 84,800

Interest Expenses 1200

Probit Before Tax [PBIT-interest] 83,600

Corporation Tax @ 19% 15884

Net Profit 67,716

Year 1: Closing stock calculation


formula: 35000
figures:
Income statement for Year : 2
Using Absorption Costing Approach
Number
ITEM of units £ P.U. AMOUNT £ AMOUNT £

SALES 4,000 92 368,000


MARGINAL COST OF SALES ,…….. ………. ………..

OPENING STOCK 600 35000


ADD: VARIABLE PRODUCTION COST: ………… ……… ………..

Direct Material 4100 17 69700

Direct Labour 4100 11 45100

Variable Expenses 4100 7 28700


Fixed indirect production cost 84000

Total Production Cost A 262500


Less: Closing stock at end of year 2.
[Opening stock units+units produced -
units sold] use formula to calculate
amount. B 700 38841.46341463

Cost of SALES : A-B: 223658.536585366

Gross Profit: Sales - Cost of Sales : 144,341

Selling and Distribution Overheads 7500

Admin Overheads 10500 18000


Profit from operations Before Interest &
Tax (PBIT) 126,341

Interest Expenses 1450

Probit Before Tax [PBIT-interest] 124,891

Corporation Tax @ 19% 23729.3780487805


Net Profit 101,162

Year 2: Closing stock calculation


formula: 38841.46
figures:

Income statement for Year : 3


Using Absorption Costing Approach
Number
ITEM of units £ P.U. AMOUNT £ AMOUNT £
SALES 3,500 92 322,000
MARGINAL COST OF SALES ,…….. ………. ………..
OPENING STOCK 700 38841
ADD: VARIABLE PRODUCTION COST: ………… ……… ………..
Direct Material 3400 17 57800
Direct Labour 3400 11 37400
Variable Expenses 3400 7 23800
Fixed indirect production cost 84000
Total Production Cost A 241841
Less: Closing stock at end of year 3.
[Opening stock units+units produced -
units sold] use formula to calculate
amount. B 600 35823.52941176
Cost of SALES : A-B: 206017.470588235
Gross Profit: Sales - Cost of Sales : 115,983
Selling and Distribution Overheads 7100
Admin Overheads 10500 17600
Profit from operations Before Interest &
Tax (PBIT) 98,383
Interest Expenses 1700
Probit Before Tax [PBIT-interest] 96,683
Corporation Tax @ 19% 18369.6805882353
Net Profit 78,313

Year 3: Closing stock calculation 35823.53


formula:
figures:

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