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Mr John, kindly help, there is no answer to this question, please work it out for me.
A company manufactures a single product. An extract from a variance control report together with relevant
standard cost data is shown below.
Standard selling price per unit $70
Standard direct material cost (5 kg ? $2 per kg) $10 per unit
Budgeted total material cost of sales $2,300 per month
Budgeted profit margin $6,900 per month
Actual results for February
Sales revenue $15,200
Total direct material cost $2,400
Direct material price variance $800 adverse
Direct material usage variance $10,000 favourable
There was no change in inventory levels during the month.What was the actual production in February?
2: Last month a manufacturing company’s profit was $2,000, calculated using absorption costing
principles. If marginal costing principles has been used, a loss of $3,000 would have occurred. The
company’s fixed production cost is $2 per unit. Sales last month were 10,000 units.
What was last month’s production (in units)?
A 7,500
B 9,500
C 10,500
D 12,500my question is, if $3000 was a loss in marginal, does it mean it will be a profit in absorption costing? how come it has been added?
Sorry – but we do not provide answers to questions like your first one. You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and workings. Attempting questions for which you do not have answers is wasting your time.
With regard to your second question, if you have watched my free lectures you will know that the difference between marginal and absorption costing profits is the change in inventory multiplied by the fixed costs per unit. You will also have seen that if inventory increases the the absorption profit will be higher than the marginal profit.
Here, you know that the absorption profit is higher by $5,000. You know that the fixed costs are $2 per unit. Therefore you know that the inventory must have increased by 2,500 units. Since the sold 10,000 units, you can calculate how many units they must have produced for the inventory to increase by 2,500 units.
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