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Dear John,
First of all, I would like to thank you for your great efforts to help students.
Second, I have a simple inquiry about the below:
If we have multi products given in the question plus general fixed cost not attributable and in the question it is said (Absorption Costing basis)
1. How can I calculate the profit? Do I have to apportion the fixed cost on no. of units for each product?
2. and what if there is an attributable fixed cost for each product plus a general fixed cost amount ?
I have failed in last exam DEC 2017 by 49%.
3. What I have noticed on last exam – most of the questions were mentioning (Absorption costing is used) – So I just want to make sure that the unique thing about this method is to minus the fixed cost from the contribution right?
Thanks and Regards,
All fixed costs are subtracted from the contribution in order to get the profit, whether they are general or specifically attributable.
Whether they are general or specific becomes relevant when one or more of the products is to stopped. If they cease producing one of the products then the specific costs related to that product will no longer occur, but the total general fixed costs will stay the same.
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