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Question 7b16 from BPP practice
I don’t really get this question .
1- They show the difference of absorting profit and margin costing is 5000$ .
Should I understand (3000) is ” minus” ?
If it is , then How can 2000 – 3000 is 5000 ?
And if is not , then that 3000 is a loss , mean they loss 3000 . How can the total of profit is 5000$?2 – The formula of production = unit sale + change in inventory ?
Thanks Mr Jonn
1. A loss of 3.000 is the same as a profit of minus 3,000.
The difference between a profit of 2,000 and a loss of 3,000 is 5,000.
This is not a maths exam, but you should remember from school anyway that
2,000 – (-3,000) = 5,000.2. Yes. If there is no change in inventory then production must equal sales.
If we are increasing inventory then we need to produce more than we sell and so production = sales plus the increase in inventory.
If we are reducing the inventory then we are selling some of the inventory and therefore produce less, and so production = sales less the decrease in inventory.Thank you Mr John
English is not my 1st language , so I still have confused the words they use in this paper like ” budget , ” standard cost , ” expected “….
Like this one , How should I understand this ?
” budget production for the month was 5000 units although the company managed to produce 5.800 units ”
Does it mean ” the company wants to produce 5.800 units , but they just have enough money to produce 5.000 unit ?”
Thanks Mr John.
No.
The budgeted on producing 5,000 units – that means that they had planned to produce 5,000 units (the word budget means plan).
They managed to produce 5,800 units means that they actual ended up producing 5,800 units.
Have you watched my free lectures on budgeting? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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