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absorption and marginal costing

Forums › FIA Forums › MA2 Managing Costs and Finance Forums › absorption and marginal costing

  • This topic has 8 replies, 7 voices, and was last updated 9 years ago by alihussain.
Viewing 9 posts - 1 through 9 (of 9 total)
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  • January 15, 2015 at 8:03 pm #222760
    Ravina
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    The fixed production overhead absorption rate for pproduct y is $2.50 per direct labor hr. Ea unit of y requires 3 direct labour hrs. Inventory of product y at the beginning of the year was 200 uunits and at the end of the month was 250 units. what is the difference in the profits using the AC and MC method??

    January 27, 2015 at 6:57 pm #223999
    decent55
    Member
    • Topics: 0
    • Replies: 6
    • ☆

    change of profit is 375. ac will b higher than mc

    April 21, 2015 at 10:16 pm #242128
    mukuka
    Member
    • Topics: 0
    • Replies: 1
    • ☆

    A cost centre uses a direct labour hour rate to absorb overheads. Data for the lastest period are as follows:
    Budgeted overheard. $27760
    Actual overheads. $23592
    Actual direct labour hours. $4925
    Overheads under absorbed. $937

    How many direct labour hours were budgeted to be worked during the period?
    A. 4925
    B. 5378
    C. 5600
    D. This cannot be calculated from the information provide

    April 23, 2015 at 6:03 am #242253
    Afrina
    Member
    • Topics: 26
    • Replies: 37
    • ☆☆

    @ Ravina

    Ans:

    Difference in profit = ( difference in inventory ) * ( Fixed OAR * direct labour hour )

    = ( 250 – 200 ) * ( $2.50 * 3 )

    = $ 375

    May 2, 2015 at 1:21 pm #243648
    alihussain
    Member
    • Topics: 3
    • Replies: 15
    • ☆

    absorbed overheads =23592+937
    =24529
    OAR =24529/4925
    =4.9805
    budgeted hr =27760/4.9805
    =5573.74
    approximately answer D

    May 8, 2015 at 6:16 pm #244824
    Rana Amr
    Member
    • Topics: 0
    • Replies: 2
    • ☆

    As we know that

    AR = Budgted overhead /Budgeted activity level

    we also know fOR under/over absorbtion we use this formula

    AR * Actual activity level = (xxx)

    Actual overhead = (xxx)

    UNDER/Over= (xxx)

    if in question they give us amount of actual overhead and there would also be under over absorption then we would do 2 step

    1) for under we should subtract the amount of under overhead from actual over head to get the value of overhead on our actual activity level

    2) for overr we should add the amount of over value of overhead from actual over head to get the value of overhead on our actual activity leve

    now comes towards your question

    A cost centre uses a direct labour hour rate to absorb overheads. Data for the lastest period are as follows:
    Budgeted overheard. $27760
    Actual overheads. $23592
    Actual direct labour hours. $4925
    Overheads under absorbed. $937

    AR * 4925 = 22655

    Actual overhead = 23592

    UNDER/Over= ( 937)

    AR = 22655/4925

    AR = 4.6

    As we know that

    AR = Budgted overhead /Budgeted activity level

    Budgeted activity level = Budgted overhead/AR

    Budgeted activity level = 27760/4.6

    Budgeted activity level = 6035

    June 17, 2015 at 12:18 pm #257443
    alihussain
    Member
    • Topics: 3
    • Replies: 15
    • ☆

    is factory canteen always a cost centre?

    in my answers book this statement is true.
    sir kindly help me….

    June 17, 2015 at 1:47 pm #257462
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10589
    • ☆☆☆☆☆

    A cost centre is anywhere you can map costs to. Therefore, the canteen can be a cost centre, as can research and development, production, warehouse, marketing etc.

    June 17, 2015 at 4:39 pm #257491
    alihussain
    Member
    • Topics: 3
    • Replies: 15
    • ☆

    thank you sir.
    once my teacher siad as it can generate revenue it can be a profit centre. so i asumed it is not always a cost centre

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