9706 · 2.2.3
Practice and worked examples for 9706 Marginal costing. Short previews only — attempt the full question in MarkScheme against the official scheme.
Sales 2,000 units @ $40. Variable cost $22 per unit. Fixed costs $24,000. Prepare marginal costing profit statement.
Sales = 2,000 × $40 = $80,000 Variable costs = 2,000 × $22 = ($44,000) Contribution = $36,000 Fixed costs = ($24,000) Profit = $12,000
Check: Contribution per unit = $18; 2,000 × 18 − 24,000 = 12,000 ✓
Absorption profit $12,000. Opening inventory 100 units; closing 300 units. Fixed overhead absorption rate $6 per unit. Reconcile to marginal profit.
Inventory increase = 300 − 100 = 200 units Fixed overhead in inventory = 200 × $6 = $1,200
Marginal profit = Absorption profit − increase in inventory fixed OH = 12,000 − 1,200 = $10,800
(Higher closing inventory → absorption profit higher than marginal.)