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25,000 units of a company’s single product were manufactured in a period during which 28,000 units were sold. Unit costs of the product were:
Direct costs:$16.20
Fixed production overheads:$7.60
Fixed non-production overheads:$2.90
What is the difference between the absorption costing profit and the marginal costing profit for the period?
You must have an answer in the same book in which you found the question, so in future please ask about whatever it is in the answer that you are not clear about.
Assuming that you have watched my free lectures, you will know that the only difference ever between the two profits is the change in the inventory multiplied by the fixed production overheads per unit.
Here the inventory decreases by 3,000 units, and therefore the difference in the profits is 3,000 x $7.60 = $22,800.
The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well 🙂
SR co :Cost card
Direct labour 2hrs @ $6 per hour $12
Direct material 1kg @ $5 per kg 5
Direct expenses 1
Prime cost = 18
SR Co produces and sells 1000 units in a month.
What price should be charged?There is no point in simply typing out a full question and expecting to be provided with a full answer. You must have an answer in the same book in which you found the question and so ask about whatever it is in the answer that you are not clear about and then I will explain.
It is completely impossible to calculate the price charged on the basis of what you have typed. Calculating the cost per unit is easy (as is all explained in my free lectures) but there is not enough information to calculate how much they decide to charge customers. Obviously they will charge more than the cost, but nothing is given about how much profit they add on to the cost. Either you have not typed out the whole question or wherever you found it, it is an impossible question.
Have you watched all the free lectures? They are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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