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A company manufactures and sells a single product. In two consecutive months the following levels of production and sales (in units) occurred:
Sales production
Month 1 3,800 3,900
Month 2 4,400 4200
The opening inventory for Month 1 was 400 units. Profits or losses have been calculated for each month using both absorption and marginal costing principles.
Which of the following combinations of profits and losses for the two months is consistent with the above data?
Sir the first figure is sale and the second is prodcution. Sales in month1 is 3800 and production is 3900. in month2 sales is 4400 and production is 4200.
A company manufactures and sells a single product. In two consecutive months the following levels of production and sales (in units) occurred:
Month 1 Month 2Sales 3800 4400
Production 3900 4200
The opening inventory for Month 1 was 400 units. Profits or losses have been calculated for each month using both absorption and marginal costing principles.
Which of the following combinations of profits and losses for the two months is consistent with the above data?
Why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they have answers 🙂
The question is not asking you too calculate the profits – there is not enough information to be able to do that. It is asking which of the combinations of profits is consistent (i.e. is possible).
I assume that you have watched my free lectures and if so you will know that is inventories increase over the period then absorption will give the higher profit. If inventories decrease then marginal will give the higher profit.
In month 1, they produce more than they sell, so inventories increase.
In month 2, they sell more than they produce, so inventories decrease.Only one of the choices of answer has the right profit being the highest in each of the two months.
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