• Skip to primary navigation
  • Skip to main content
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • CIMA BA2 Fundamentals of Management Accounting
  • BA2 Notes
  • BA2 Lectures
  • BA2 Flashcards
  • Cert BA Forums
  • Ask the Tutor

20% off ACCA Books

Books for Sept'23 ACCA exams
Get your discount code >>

ACCA June '23 Exams

Instant Poll
Read & post comments >>

New! Ask ACCA AI Tutor

Post your questions
& get instant answers >>

CIMA BA2 – The Management Accountant’s Profit Statement – Absorption Costing

VIVA Financial

View all CIMA BA2 lectures | Download BA2 notes


Reader Interactions

Comments

  1. rusz1x10 says

    August 26, 2019 at 1:36 pm

    Hello,

    I have one question regarding 1st example:

    Shouldn’t we also adjust absorbtion rate for goods that were transferred to inventory?

    i.e. = 20000/11000 = 1.82 – Absorbtion rate of f/o in Jan

    Cost of production in Jan:
    Materials 12$ * 11000 = 132000
    Labour 8*11000 = 88000
    Var o/h 5*11000 = 35000
    Fix o/h 1,82 * 11000 = 20000
    Total = 26,82 295000

    less 2000 (stock) * 26,82 = 53640

    Gross profit in Jan = 315000 – 295000 – 53640 = 73640

    Log in to Reply
    • rusz1x10 says

      August 26, 2019 at 1:40 pm

      Correction: Gross profit in Jan = 315000 – (295000 – 53640) = 73640

      Log in to Reply
      • John Moffat says

        August 26, 2019 at 4:54 pm

        No – the answer in the notes (and in the lecture) is correct.

        The absorption rate is always based on the budgeted overheads and budgeted production and is therefore $20,000/10,000 = $2 per unit.

        This forms parts of the standard cost, and the production is costed at the standard cost and the inventory is valued at standard cost.

        Because the actual production I’m January is more than 10,000, too many fixed overheads will have been absorbed which is why we need the adjustment for the over absorption.

      • rusz1x10 says

        August 26, 2019 at 7:34 pm

        Thank you very much for reply and explanations!

Leave a Reply Cancel reply

You must be logged in to post a comment.

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy