Solution 4.1
  A) Explain the following terms
 

The term marginal cost refers to the additional costs incurred in providing a unit of product or service.

The term contribution refers to the amount that a product or service contributes towards covering fixed costs. It is simply sales value less variable costs.

A fixed cost is a cost that is unaffected by fluctuations in the level of activity (within a relevant range).

B) Marginal format

Marginal Statement

 

Sales

4,300,000

Variable costs

Direct material

1,250,000

Direct labour

760,000

Variable overhead

95,000

Variable sales expenses

75,000
2,180,000

CONTRIBUTION

2,120,000

Fixed costs

Fixed overhead

1,165,000

Fixed sales expenses

450,000

Fixed administration

550,000
2,165,000

NET LOSS

_(45,000)