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OpenTuition | ACCA | CIMA
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OpenTuition | ACCA | CIMA
Free ACCA and CIMA on line courses | Free ACCA, CIMA, FIA Notes, Lectures, Tests and Forums
Very interesting videos. It’s so much easier when I study like that but I hope you update them because half of the lectures are removed from the textbooks.
Hi John,
When you adjust for the closing inventory, are we not also adjusting for the overabsorption of fixed costs? i.e. the 2,000 overabsorption is included in the 54,000 that you subtract from the cost of sales?
I am sure that what you have done is correct, I just don’t understand how.
Would you please be able to help me understand this?
In management accounting we always value inventories at the standard cost. So the adjustment for the over or under absorption is the difference is based on the overheads actually absorbed.
HI John while Illustrating for Feb I am encountering the problem as follow:
Sales 11500 * 35 $402,500
COS
Materials 11,500 * 12 138,000
Labour 11,500 * 8 92,000
V OAR 11,500 * 5 57,500
Fix OH 9,500 * 2 19,000 ($306,500)
Adjustment Overhead (1,000)
Profit before the selling cost $95,000
other selling costs (13,500)
Profit————————————————– $81,500
I am unable to see the problem please can you advise?
The opening inventory was 2,000 units, and the production in February was 9,500 units.
Check the answer as printed at the end of the lecture notes.
Thank you for your reply..
I did not realise the P&L was there and of course a rookie mistake of illogical stock reasoning.
Feels bad as I wasted 3 days to figure this out.
Cheers though, grateful!
No problem 🙂
Dear Mr Moffat, regarding fixed production overheads – you end up calculating as expense only 18K USD, moreover you recharge as income 2K USD to the final profit, which in my opinion should be the opposite, it should be recharged as expense 2K USD, hence the final profit 59K USD. Appreciate if you can look at this, and confirm your opinion.
Thank you.
Sir for January in absorption costing
Why did you consider the $20,000 as budgeted
It says in the question that “fixed production overheads are budgeted at $20,000 per month”
So how do you assume that this was the actual???
Isn’t the actual figures supposed to be $22,000?
The question asks for budget profit statements. The budgeted fixed overheads are 20,000 and (by definition) will not change with the level of activity.
With absorption costing we will absorb $22,000 but then have the adjustment for over-absorption because the budget figure should stay at $20,000.
Hello there sir.
1) In the first exercize, if the actual fixed overhead is not mentioned, you take the budgeted fixed overhead as the Actual ?
Reason:
In the second exercize, the actual fixed overhead was mentioned, so I observed you did not consider the budgeted fixed overhead as the actual this time around -like you did so for the first exercize.