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Marginal Costing
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Hi,
Can you please explain the following question (taken from ACCA pilot paper):
A company manufactures and sells a single product. In two consecutive months the following levels of production and sales (in units) occurred:
Sales
Month 1 – 3,800
Month 2 – 4,400
Production
Month 1 – 3,900
Month 2 – 4,200
The opening inventory for Month 1 was 400 units. Profits or losses have been calculated for each month using both absorption and marginal costing principles.
Which of the following combination of profits and losses for the two months is consistent with the above data?
A)
Absorption costing profit/(loss)
Month 1: ($400)
Month 2: $3,200
Marginal costing profit/(loss)
Month 1: $200
Month 2: $4,400
B)
Absorption costing profit/(loss)
Month 1: $200
Month 2: $4,400
Marginal costing profit/(loss)
Month 1: ($400)
Month 2: $3,200
C)
Absorption costing profit/(loss)
Month 1: ($400)
Month 2: $4,400
Marginal costing profit/(loss)
Month 1: $200
Month 2: $3,200
D)
Absorption costing profit/(loss)
Month 1: $200
Month 2: $3,200
Marginal costing profit/(loss)
Month 1: ($400)
Month 2: $4,400
Thanks.
Dear Tutor
i have a problem and hope that you can help me to make it more clear
in chapter 9 , for quetion 4 , about caculating marginal cost i haven’t now understood when we add or minus opening & closing inventory value to determine marginal costing profit. is there any rule for this?
I know that marginal costing doesnot include fixed o/h, and we need to subtract or plus when we identify marginal costing. in this question, i still be unclear.
lookforward to receive yr soon reply
khan the idea is to calculate the cogs by adding inventory at hand(begining of period) to production and subtracting closing inventory at the end of the period. no pun intended, take this example, suppose you love to eat apples everyday, and today you woke up with 2 apples, and bought 10 more but when go off to sleep you have 4 remainining. how do we calculate what you ate, its 2 plus ten less 4 you still have meaning you ate 8.actually there is an accounting principle called the matching concept, that dictates that closing inventory should not be charged to the cogs because it has not been sold.
thanx i know this concept but i dont know how to apply it in bbp guide
i got one question plz explain soo i willl able to use this way
in july the marginal coting profit of tommyinc for production of the bumper was $78000.inventory at the end of june was 1250 units &1000 units at the end of july.
calculate the absorption costing profit for july if the overhead absorption rate was $8 perunit
i am getting confused with variable & selling fixed cost y we deduct variable selling cost plz help me to clear my concepts regarding variable selling cost
@admirableprinces, For the valuation of inventory we only include production costs.
However if you are asked for the contribution then this is the selling price less all variable costs – variable production costs and variable selling costs.
dear i am not getting the concept of reconcile the marginal & absorption costing profits
@admirableprinces, The only reason why the profits will be different is because of the way we value inventories. Absorption costing includes fixed overheads in the valuation of inventories, but marginal costing does not include fixed overheads.
thank you for the lecture. i really appreciate that surely. i got an easy problem is after practicing example 3, i wanted to check my answer but i couldn’t find it on the lecture note. Would it because this example 3 out of exam’s syllabus?
sorry for disturbing. i found out the answer by myself. thank you so much.
ok
this waaaas a very helpful lecture and thanks for guiding us free of cost
but kiiiiiiiiiiiindly don’t go for the paid help
thank you
The lecture notes are not readily available yet they are of great importance when one is revising the course notes. Is there any way you can improve on this because everytime i try to load the system stops responding- your server cannot be accessed at that instant. However the same does not happen with course notes.
Problem is with your pc or network
hi i dnt use the same book i use bpp text can i get the answer for february profit please?
@desie86, Well you need to use the free Course Notes to follow the example in the lecture. The answer for February is at the back o the course notes.
Understood
