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absorption and marginal costing system

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › absorption and marginal costing system

  • This topic has 2 replies, 2 voices, and was last updated 4 years ago by John Moffat.
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  • March 21, 2021 at 6:05 pm #614923
    Trusiax
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Materials 3
    Labour 2
    Variable production overhead 2
    Fixed production overhead 5
    Variable selling cost 1
    Fixed selling overhead 2
    Profit 5
    –––
    Sales price 20
    –––
    Both types of fixed overheads were based on a budget of 10,000 cakes a year.
    In the first year of production, the only difference from the budget was that company produced 11,000 cakes and sold 9,000.
    All costs and revenues were in line with the levels budgeted per unit.

    Calculate the profit made under an absorption costing system and a marginal costing system.

    March 21, 2021 at 7:24 pm #614925
    Trusiax
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    I have calculated it and my absorption costing is 46270 is that correct?

    March 22, 2021 at 8:57 am #614949
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Why are you attempting a question 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!

    The correct answer is not $46,720. It is $38,000.

    The standard profit is 9,000 x $8 per unit = $72,000.
    There is an over-absorption of fixed production overheads of (11,000 – 10,000) x $5 = $5,000
    The selling costs are: variable 9,000 x $1 = $9,000; and fixed 10,000 x $2 = $20,000

    So the profit is 72,000 – 5,000 – 29,000 = $38,000

    Do watch my free lectures on this, where I work through a very similar example.
    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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