OpenTuition | ACCA | CIMA
Free ACCA and CIMA on line courses | Free ACCA, CIMA, FIA Notes, Lectures, Tests and Forums
Spread the word
If you have benefited from our materials, please spread the word so more students can benefit.
To help us keep materials up to do and add new content you can also donate
July 20, 2020 at 8:13 am
Thank you sir for this kind of tests i got 100% very very helpful the thing is that just read question carefully.
John Moffat says
July 20, 2020 at 9:17 am
You are welcome (but do make sure you buy a Revision Kit from one of the ACCA approved publishers so that you have lots more questions to practice 🙂 )
October 20, 2019 at 4:20 pm
The examples in both lectures on absorption and marginal costing is giving us the selling price, hence allowing us to calculate the profit. Q1 and Q5 does not give us the selling price, so how can we calculate the profits then come up with the difference between absorption and marginal?
October 21, 2019 at 7:30 am
The question does not ask for the profits, it asks what the difference in the profits will be.
As I explain in my free lectures, the difference in the profits will always only be the change in inventory multiplied bu the fixed production overheads per unit.
October 21, 2019 at 1:08 pm
October 21, 2019 at 3:28 pm
You are welcome 🙂
September 12, 2019 at 1:10 pm
When do we know we’ve had an over-absorption or under-absorption of overheads? Is it when we have a psitive answer that we get an over-absorption? Also, i know this is a little stupid but, is ‘normal level of activity’ referred to as Sales?
September 12, 2019 at 3:19 pm
If the actual fixed overheads are more than the amount absorbed, then we have under-absorbed. If the actual fixed overheads are less than the amount absorbed, then we have over absorbed.
The normal level of activity is the level of production used to calculate the overhead absorption rate.
Have you watched my free lectures on this?
September 13, 2019 at 2:46 pm
Yes sir. Thank you very much!
July 11, 2019 at 9:42 am
Hi. Johns. How would the solution (for question 4) been, had there been opening inventory. cheers
July 11, 2019 at 11:11 am
As I explain in my free lectures, the only difference ever between the absorption and marginal profits is the change in the inventory multiplied by the fixed production over heads per unit.
In this question, the fact that there was no opening inventory is irrelevant because whatever the opening inventory had been then the fact that they produced 17,500 units but only sold 15,000 units means that the inventory would have increased by 2,500 units. So the answer would still be the same.
July 11, 2019 at 9:26 pm
you are right. many thanks.
July 12, 2019 at 7:16 am
July 12, 2019 at 7:11 pm
on a third thought I think opening inventory is very rrelevant…… in the example of given, for example, February had a production of 9000 units but sold 11000 units. what guarantee would show a 2000 opening inventory had it not been a January scenario. and the fact that they mention no opening inventory i this case shows that an opening inventory option is possible.
July 12, 2019 at 9:15 pm
If they produce 2,500 units more than they sell, then the inventory must increase by 2,500 units!!
Of course it is possible for there to be opening inventory, but if there was then the closing inventory would still be 2,500 more than the opening inventory and this is all that matters.
Please watch the lecture again 🙂
May 30, 2019 at 5:02 am
When calculating profit using marginal method, we exclude fixed cost, why is that we are multiplying the fixed cost rate by the difference of closing Inventory to get Marginal profit?
May 30, 2019 at 8:38 am
I don’t know which question you are referring to.
However with marginal costing we do not exclude fixed cost when arriving at the profit – we subtract the fixed cost from the contribution in order to arrive at the profit.
Also, the difference between the absorption profit and the marginal profit is always only the change in inventory multiplied by the fixed cost per unit.
All of this is explained in the free lectures. Did you watch them before attempting this test?
You must be logged in to post a comment.