- This topic has 1 reply, 2 voices, and was last updated 3 years ago by
.
- Posts
SS Ltd. has opening inventory and closing inventory of 5000 units and 7000 units respectively. The value of closing inventory under absorption costing is 105000. Profit under marginal costing and absorption costing was 20000 and 40000 respectively. Calculate Variable cost per unit.
Ans) 5I assume that you have watched my free lectures on marginal and absorption costing and therefore know that the only difference ever between the marginal and absorption profits is the change in inventory over the period multiplied by the fixed cost per unit.
Here the inventory increased by 2,000 units and the profits were different by $20,000. Therefore the fixed cost per unit is 20,000 / 2,000 = $10.
The value of the closing inventory using absorption costing is 10,500 / 7,000 = $15 per unit.
Therefore the variable cost per unit is $15 – $10 = $5.
- You must be logged in to reply to this topic.