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  3. a company uses absorption costing system based on

A company uses absorption costing system based on standard costs. The total variable...

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A company uses absorption costing system based on standard costs. The total variable manufacturing cost is 6 per unit. The standard production rate is 10 units per machine hour. Total budgeted and actual fixed production overhead costs are 38, 40,000. Fixed production overhead is allocated at 14 per machine hour. Assume this same standard for the last year and current year. Selling price is Rs. 10 per unit. Variable selling overheads are *2 per unit and fixed selling costs are * 2,40,000. Assume that there are no price, spending or efficiency variances. Beginning inventory was 30,000 units and ending inventory was 40,000 units. (i) Compute the break-even point under absorption costing, assuming that there will be an under absorption of overhead and that production variance is written off at year end as adjustment to cost of goods sold. (ii) Compute the break-even point under marginal costing. (ii) Assuming that sales were at break-even level computed under (ii) above, and that production variance is written off at year end as adjustment to cost of goods sold, and that stock levels were as given above, find the profit under absorption costing. (detailed cost statement not essential)

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