1. **Problem Statement:** Calculate cost per unit, ending inventory value, prepare Statement of Comprehensive Income, and show net profit adjustment using absorption and marginal costing for WSB in November 2025. 2. **Formulas and Rules:** - Absorption costing includes direct materials, direct labor, variable overhead, and fixed overhead in product cost. - Marginal costing includes direct materials, direct labor, and variable overhead only. - Fixed overhead and fixed selling/admin expenses are treated as period costs in marginal costing. 3. **Calculate Total Production Cost:** - Direct material = 545,000 - Direct labour = 336,000 - Variable overhead = 127,000 - Fixed overhead = 128,000 4. **Calculate Cost per Unit:** - Total units produced = 40 - Absorption costing cost per unit: $$\text{Cost per unit} = \frac{545,000 + 336,000 + 127,000 + 128,000}{40} = \frac{1,136,000}{40} = 28,400$$ - Marginal costing cost per unit: $$\text{Cost per unit} = \frac{545,000 + 336,000 + 127,000}{40} = \frac{1,008,000}{40} = 25,200$$ 5. **Calculate Ending Inventory Value:** - Ending inventory units = 10 - Absorption costing ending inventory: $$10 \times 28,400 = 284,000$$ - Marginal costing ending inventory: $$10 \times 25,200 = 252,000$$ 6. **Prepare Statement of Comprehensive Income:** - Sales revenue = 40 units sold $40 - 10 = 30$ units sold $\times 40,000 = 1,200,000$ - Variable selling expense = 500/unit $\times 30 = 15,000$ - Fixed sales & admin expenses = 40,000 + 60,000 + 100,000 + 12,000 + 22,000 = 234,000 **Absorption Costing:** - Cost of goods sold (COGS) = $40 \times 28,400 - 10 \times 28,400 = 1,136,000 - 284,000 = 852,000$ - Gross profit = 1,200,000 - 852,000 = 348,000 - Selling & admin expenses = 15,000 + 234,000 = 249,000 - Net profit = 348,000 - 249,000 = 99,000 **Marginal Costing:** - Variable production cost = $40 \times 25,200 = 1,008,000$ - Variable COGS = $30 \times 25,200 = 756,000$ - Contribution margin = 1,200,000 - 15,000 - 756,000 = 429,000 - Fixed costs = 128,000 (fixed overhead) + 234,000 (fixed selling/admin) = 362,000 - Net profit = 429,000 - 362,000 = 67,000 7. **Adjustment of Net Profit Difference:** - Difference = 99,000 - 67,000 = 32,000 - This difference equals fixed overhead deferred in inventory under absorption costing: $$\text{Fixed overhead per unit} = \frac{128,000}{40} = 3,200$$ - Fixed overhead in ending inventory = 10 \times 3,200 = 32,000 **Summary:** - Absorption costing net profit is higher by 32,000 due to fixed overhead included in inventory.