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last month a company’s profit was $2000 ,using absorption costing . if marginal costing has been used , loss of $3000 would have occurred . fixed production cost is $2/unit .sales last month were 10000 units .what was last month’s production ? no.of units change in inventory = $5000/$2= 2500+10000 sales=12500 ans…………my question is why there is 5000? 3000 is loss and 2000 is profit why he added up..
a company has established a MC profit of 72300 . opning inventory was 300 and closing inventory is 750units. fix production overhead rate $5/unit what was the profit under absorption costing ? $74550 solution : marginal profit $ 72300 less:fixed cost in opening inventory ( 300*$5) ( 1500) add:fix cost in closing invntory ( 750*$5) 3750 absorption costing profit is 74550 now my question is why is he deducting opening inventory and adding closing inventory
