4

b. Variable costing:
Profit statement (Variable costing)-February
Sales (11500 units/22 Euro) € 253,000
Beginning inventory 0
Manufacturing cost (29000+19000+7300) € 55,300
Ending inventory ((55300/12500) *1000 units) € 4,424
Cost of goods sold (55300-4424) € 50,876
Variable selling & administrative expenses € 36225
Contribution margin (253000-77188) € 165,899
Fixed production overheads € 28,600
Fixed selling & administrative expenses € 8,275
Operating income (165899-28600-8275) € 129,024

Profit statement (Variable costing)-March
Sales (15500 units/22 Euro) € 341,000
Beginning inventory (same ending inventory for February) € 4,424
Manufacturing cost (33250+22000+8500) € 63,750
Ending inventory 0
Cost of goods sold (63750+4424) € 68,174
Variable selling & administrative expenses € 48825
Contribution margin (341000-68174-48825) € 224,001
Fixed production overheads € 28,600
Fixed selling & administrative expenses € 8,275
Operating income (224001-28600-8275) € 187,126

2.Profit Reconciliation Statement calculated using Absorption Costing to that using
Variable Costing

Reconciliation Statement FebruaryMarch
Net operating income under absorption costing € 131,312€ 184,838
Less Fixed Manufacturing Overheads carried forward
(Closing Inventory) (1000*(28600/12500)) € 2,288
Add Fixed Manufacturing Overheads brought forward
(Beginning Inventory) (1000*(28600/12500)) € 2,288
Net Income using Variable Costing € 129,024€ 187,126

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