Comments

  1. avatar says

    can i know how we actually get the amount of $22000 for the amount of overheads absorbed? I’ve repeatly listen to the lecture but still can’t get for the amount of $22000

  2. avatar says

    My apologies being new on the site i dont know how to edit my earlier query.

    What i meant by above is my Cost of sales was not being charged with entire amount of FOH absorbed i.e 22,000. So to the Net Profit of 72000 if i am adding the entire amount of 2000 extra charged over budgeted, am i not over stating the profit earned to Managing Director for that month. Though i agree the next month this would get adjusted as it would form the opening Stock.

    Am i missing something here ?

    • Profile photo of John Moffat says

      What you say is correct which is one of the reasons why there is the alternative of using marginal costing instead (although in the long term it makes no difference).
      (Although in financial accounting fixed overheads of production have to be included in the inventory value)

      • avatar says

        Thanks a ton again John for clarifying and upholding my thought process.

        Its with finest precision you explain things that such doubts naturally come…

        cheers and thanks again for being an excellent teacher…

  3. avatar says

    Dear John,

    My apologies being new on the site i dont know how to edit my earlier query.

    What i meant by above is my Cost of sales was not being charged with entire amount of FOH absorbed i.e 22,000. So to the Net Profit of 72000 if i am adding the entire amount of 2000 extra charged over budgeted, am i not over stating the profit earned to Managing Director for that month. Though i agree the next month this would get adjusted as it would form the opening Stock.

    Am i missing something here ?

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