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Absorption and Marginal Costing

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.
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  • June 18, 2021 at 2:30 pm #625692
    FurryClaw99
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    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 5

    In 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) 300 400 600

    In 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 costing

    I have problem solving this question, can you help me please ? Thank you so much

    June 18, 2021 at 3:26 pm #625711
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    Please 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.)

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