[adalda]

I read the lecture but I did not understand

can you explain it briefly?????

[adalda]

how and why The cost of actually growing the potatoes will not change?

[adalda]

actually, I am not student in AccA ,but If you want help me , give me the full correct answer

[adalda]

Is the answer correct ?? and the problem in the under/over absorption , how I can calculate it in the question ???

[adalda]

this is answer :-

Prepare the income statement for the year ended 30 Nov 2010 using the following two methods
Absorption costing
Items Value ($) 000’ Value ($) 000’
Sales 1,350
Less Variable costs
Direct labour 312
Direct material 208
Fixed production costs absorbed 832
Fixed selling costs absorbed 90 1,442

Gross profit (92)
Less fixed costs overhead 830
Net loss (922)

Marginal costing
Items Value ($) 000’ Value ($) 000’
Sales 1,350
Less variable costs
Direct material 312
Direct labour 208 (520)
Gross profit margin 830
Less fixed costs
Fixed production overhead 830
Fixed selling overhead 100
Net loss (100)

Compare the profits of absorption and marginal costing calculated above and explain the reasons for any differences
Under the absorption costing, fixed manufacturing overheads are treated as product costs and it is believed that products cannot be produced without the resources provided by fixed manufacturing overheads. On the other hand, marginal costing, fixed manufacturing overhead are treated as periodic costs and they will be incurred whether is production or not. Therefore, it is believed that only the variable costs are relevant to decision-making.
Workings
Standard fixed production overhead = $800,000/50,000=$16
Standard fixed selling overhead = $100,000/50,000=$2
Therefore, the fixed production costs absorbed =$16*52,000=$832,000
While the variable selling overheads absorbed =$2*45,000= 90,000

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