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Please solve this
25000 units of a company single product are produced in a periode during which 28000 units are sold opening inventory was 7000 units unit cost of the product are
Direct cost 16.20$ per unit
Fixed production overhead. 7.60$ per unit
Fixed non production overhead 2.90$.per unitWhat is the difference in profit between absorption and Marginal costing?
A $22800
B $30400
C $31500
D $42000Why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and workings!!!
If you have watched my free lectures on this, then you will know that the only difference ever between the marginal and absorption profits is the change in inventory multiplied by the fixed production overheads per unit.
The inventory is falling by 28,000 – 25,000 = 3,000 units. The fixed production overheads are $7.60 per unit. Therefore the difference in profit is 3,000 x $7.60.
Do watch the lectures. They are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well 🙂
If i am not wrong, difference in profit is no. of units of closing inventory (4000) × OAR (7.6) = 30400
Closing inventory should be 4000
Closing = Opening + Production – Sales
7000 + 25000 – 28000
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