Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Absorption and Marginal Costing
- This topic has 1 reply, 2 voices, and was last updated 4 years ago by
John Moffat.
- AuthorPosts
- June 18, 2021 at 2:30 pm #625692
Question: Moonlight.Ltd (Moonlight manufactures and sells three types of computer keyboards and data for these for June was as follows:
Gaming Standard Eco
Selling price (per unit) $265 $220 $195
Variable materials (per unit) $150 $125 $100
Variable labour (per unit) $36 $36 $30
Variable production overhead (per unit) $20 $18 $16
Actual production (units) 250 400 500
Closing inventory (units) 25 30 10
The variable labour rate is $10 per hour and Moonlight’s fixed overheads for June were $23.040. There was n opening inventory of any of the keyboards.
During July, Moonlight’s fixed overhead absorption rate was calculated as $6 per labour hour. The labour cost per hour and per unit remained at their June values. The value of the closing inventory for each type of the keyboard was calculated using absorption costing as below.
Closing inventory
$ Units
Gaming 4,600 20
Standard 6,000 30
Eco 800 5In August, Moonlight sold all the keyboards it could produce during the month together with the entire opening inventory. Fixed production overheads were $31,000 for August; and the selling price, absorption cost, production and inventory information for August was as follow:
Gaming Standard Eco
Selling price (per unit) $270 $230 $195
Total absorption cost (per unit) as July $230 $200 $160
Opening inventory (units) 20 30 5
Actual production (units) 300 400 600In September, production data and costs were the same as in August, but Moonlight did not sell all the keyboards that it produced.
Required
a. Calculate the cost of sales for each keyboard for June using marginal costing
b. Calculate the fixed overhead absorption rate as a percentage of the labour cost for June
c. Calculate the value of the closing inventory for each keyboard for July using marginal costing
d. Assume that there was $1,170 of fixed production overheads included in the value of opening inventory, prepare the Income Statement for August under both marginal costing and absorption costing?
e. In September, Moonlight’s profit was higher under which costing (marginal costing or absorption costingI have problem solving this question, can you help me please ? Thank you so much
June 18, 2021 at 3:26 pm #625711Please do not type out full questions and expect to be provided with a full answer.
You must have an answer in the same book in which you found the question. So ask about whatever it is in the answer that you are not clear about and then I will explain.
(Everything needed to be able to answer this question is explained in my free lectures. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.)
- AuthorPosts
- You must be logged in to reply to this topic.