Worked under assumption no inventory brought into Jan and none carried over into march, (production of 11 in Jan, subtract sales of 9 for a cfwd amount of 2 into Feb, production of 9.5 gives us a total stock of 11.5, which is then reduced to Nil with 11.5 Feb Sales figure)
Sir, if the production was lesser than the sales then closing inventory wont be included right? So for the cost of production we wont subtract closing inventory?
If production is lower than sales then the inventory will decrease. (There must have been opening inventory otherwise they would not have had enough to sell!! The closing inventory will be lower than the opening inventory.)
In example 1, For the ‘Actual Fixed OH’ You have taken the “Budgeted” OH of $20,000, Whilst in Example 2, You have used $315,000 of the Amount provided for the ‘Actual Fixed OH’ instead the Budgeted OH of $320,000.
Could you please be kind enough to justify why you have inverted the use of the elements when applying it to the same concept & How I should be expected to deal with such similar situations at the Exam.
Aangela says
For method in February, what if there is inventory left in closing, does it need to subtract before adjustment?
StephenGr says
Worked under assumption no inventory brought into Jan and none carried over into march, (production of 11 in Jan, subtract sales of 9 for a cfwd amount of 2 into Feb, production of 9.5 gives us a total stock of 11.5, which is then reduced to Nil with 11.5 Feb Sales figure)
Hope this helps 🙂
reizee says
Sir, if the production was lesser than the sales then closing inventory wont be included right? So for the cost of production we wont subtract closing inventory?
John Moffat says
If production is lower than sales then the inventory will decrease. (There must have been opening inventory otherwise they would not have had enough to sell!! The closing inventory will be lower than the opening inventory.)
John Moffat says
Example 1 asks for the budget profit statements and so the actual fixed overheads are irrelevant.
In example 2 we are told the actual fixed overheads.
L.Thenuka says
Noted,
Thank You!
John Moffat says
You are welcome.
L.Thenuka says
Dear John,
In example 1, For the ‘Actual Fixed OH’ You have taken the “Budgeted” OH of $20,000,
Whilst in Example 2, You have used $315,000 of the Amount provided for the ‘Actual Fixed OH’ instead the Budgeted OH of $320,000.
Could you please be kind enough to justify why you have inverted the use of the elements when applying it to the same concept & How I should be expected to deal with such similar situations at the Exam.
Much Appreciated! 🙂