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Dear John,
I paste from another text book I am using
—–The main difference between absorption costing and marginal costing is that:
– in absorption costing, inventory cost includes a share of fixed production overhead costs
– in marginal costing, inventory cost contains no fixed production overhead costs.The following rules may be applied to calculate the difference in the profit for a
period calculated with marginal costing and with absorption costing.—–Why do we consider only inventory?
I am asking this question because I am doing Ch. 9. pg. 53 – Question 4 of your notes. And I am a little confused.
Thanks for your help.
Cheers
The only difference between marginal and absorption costing (apart from the way we set out the profit statement, which does not affect the actual figures) is that inventory is valued differently (as the statement you quote says). Otherwise the revenue and the costs of production are exactly the same.
If inventory is valued differently then automatically the profit will be different.
(are you watching the free lectures (there is no point using our notes without the lectures) because this point is explained in the lectures)
Yes, I am watching the lectures while reading your notes. Maybe I missed this bit.
i got $45100 is that correct for question 4. chapter 9 and in Q6 I got $4 thus 280 000/ 70 000
The answers to all of the questions are in the Lecture Notes – if you look at the contents page it will tell you which page.
Dear Sir i cant solve it i had no clue could you please help me
A company uses standard marginal costing.
For April, the budgeted sales and production were 2,000 units, and the actual sales production were 2,200 units.
The standard selling price was $20/unit,and the standard variable production cost was $14/unit.
The actual selling price was $23/unit, and the standard variable production cost was $15/unit
What was the favourable sales price variance for April?how come the answer is 6600?
Please do start a new thread when you are asking about a different topic – this is a question on variances and nothing to do with absorption as against marginal costing!
It would seem that you have not watched our free lectures on variances, because this is a very easy question.
Our lectures are a complete course for Paper F2 and cover everything needed to be able to pass the exam well.
They sold 2,200 units. Every unit was sold at $3 more than the standard selling price.
Therefore the sales price variance is 2,200 x $3.
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