Technical Problems
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how are we supposed to solve the 1st question, we are not given the fixed costs
You have to calculate them. You know the absorption rate, you know the budgeted activity level, and you know that the fixed costs are as budgeted!!
(I assume that you have watched the lectures before attempting the test?)
Hello Sir,
In question 5 why didn’t we absorb the fixed selling cost? ($12000)
Sorry i got it! The increase or decrease in inventory has nothing to do with selling cost that ll be deducted later from the total contribution if we prepare Profit loss statement.
Correct 馃檪
yeah your questions are quite interseting.they help us a lot to prepare for the exams
Good – although do make sure you buy a Revision Kit from one of the ACCA approved publishers. It is important to practice as many exam standard questions as possible, and the Revision Kits have lots of questions.
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?
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.
Yes, thank you, that makes sense now.
Great 馃檪
In question 1 why we didn’t adjust profit for over absorption as actual outputwas more than budget total???
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.
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,
200
Which is what I wrote in my reply 馃檪
in question 5 how is the inventory increasing? 14000 production and 12000 sales. how is it increasing?
If you produce more units then you sell, then the extra units go to increase the inventory!!