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Greetings. When in the beginning you carry out the quick calculation of profit (9,000 x (35-27) = 72,000). The cost card used in the calculation uses the the oar based on the original budgeted hours of 10,000, and not 11,000 adulteration, so why is the answer not directly 74,000 here, which you get later after making adjustments to the workings.
Greetings.
For the workings in Ex1, why did you take the budgeted fixed overhead (20,000) and call it actual fixed overhead in the workings, thus leading the answer to be termed as an over absorption.
great lectures
Thank you for your comment 🙂
Thank you so much for those lectures!
I’m planning to sit on exam March 2021!
Are those lectures up to date please?
It’s easy study with your lectures rather than massive amounts of information in BPP text book!
Thank you on advance ?
Our lectures are always up to date for the current syllabus (and the syllabus will not be updated until after the June 2021 exams).
Why there is no practise question for chapter 9
Because most exam question test Chapters 9 and 10 together, so the test after Chapter 10 does this. You will find it is the same for questions in your Revision Kit.
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.
Greetings.
For the workings in Ex1, why did you take the budgeted fixed overhead (20,000) and call it actual fixed overhead in the workings, thus leading the answer to be termed as an over absorption.
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