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August 15, 2017 at 8:34 pm
Hello, in question 5, why do we use the normal activity level and not the actual amount sold when calculating the fixed overhead absorption rate?
John Moffat says
August 16, 2017 at 9:35 am
We need to cost in advance and so we always use budgeted overheads and budgeted production to calculate the absorption rate.
Did you watch the free lectures before attempting the test? The lectures are a complete free course and cover everything needed to be able to pass the exam well.
August 16, 2017 at 1:50 pm
Yes, thank you, that makes sense now.
August 16, 2017 at 4:24 pm
July 9, 2017 at 12:10 pm
In question 1 why we didn’t adjust profit for over absorption as actual outputwas more than budget total???
July 9, 2017 at 2:30 pm
The absorption profit given in the question will have been after any adjustment necessary.
The question wants the marginal profit, and you will know from the free lectures that the only difference ever between marginal and absorption profit is the change in the inventory multiplied by the fixed costs per unit.
July 9, 2017 at 2:35 pm
i dunno what u meant..the sales income is constant no matter what kind of way u take,but the profit changes becoz of the change ofthe costing.As we all know,difference in profit =change in stock ^OAR/unit ,so the difference is
200^12=2400, and we know output>sales volumn,so within marginal costing,the profit will be reduced,
July 9, 2017 at 2:44 pm
Which is what I wrote in my reply 🙂
May 17, 2017 at 9:10 pm
in question 5 how is the inventory increasing? 14000 production and 12000 sales. how is it increasing?
May 18, 2017 at 6:51 am
If you produce more units then you sell, then the extra units go to increase the inventory!!
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