F2 Chapter 9 Questions
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Thank you for the lecture.
On the last question, when calculating fixed overhead absorption rate, shouldn’t it also include fixed selling cost which will be (63000+12000)/14000=5.36?
No!
The only reason for the profits being different is because of the fixed overheads in inventory.
When valuing inventory using absorption costing we only ever include the fixed costs of production.
It will help you to watch my free lectures on absorption and marginal costing.
Hallo, i really appreciate your efforts towards making us benefit as much as possible from the notes and lectures. Am a bit confused by question #2 especially on how to get the standard absorption rate..thanks in advance
Since the production overheads were under absorbed, the amount absorbed/charged must have been 295,000 – 9,400 = 285,600.
This must have been the actual hours worked, charged at the standard rate per hour, and therefore the standard rate must have been 285,600/70,000 = $4.08 per hour.
Thank you very much for great lectures, notes and testes. Could you please explain to me question number 2.
According information we have budgeted overheads 280.000 and actual overheads( amount absorbed) 295.000 why it is said that production overheads under absorbed by 9400? Thought it is over absorbed because budgeted figure is more than actual result. Thank you
Overheads absorbed are not the same as actual overheads. The overheads absorbed are always the actual hours multiplied by the standard absorption rate per hour.
What is the difference of all this three overheads? 1. Budgeted – ( overheads we planned), absorbed ( actual amount hours multiplied by rate) and actual ( actual figure?) In profit statement we compare overheads absorbed with budgeted or actual? Thank you very much.
hello,
a bit confused with question where answer is 27K where production is 14k and sell 12k. We deduct 9k from 36k to get marginal but why we didnt deduct 2k as well? why we did not pay attention to Fixed selling price?? it shouldn’t be included in marginal as well but we havent touched this amount.
Thanks in advance,
Kristina
Kristina selling costs is different from cost of sales/production.It is not included in the cost of production while calculating profit using absorption costing. And the reason why it is not included in marginal costing over here is because the difference in profit due to absorption and marginal costing is because of closing inventory. And it is this inventory which has not been sold till yet. So there can be no fixed selling cost for them