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Absorption marginal costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Absorption marginal costing

  • This topic has 0 replies, 1 voice, and was last updated 5 years ago by Avatarabdiaziz1.
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  • February 3, 2021 at 3:50 pm #608989
    Avatarabdiaziz1
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    • Topics: 31
    • Replies: 30
    • ☆☆

    Thank you very much for the help.

    In a period a company had opening inventory of 31000 units of Product G and closing inventory of 34000 units Profits on marginal costing were 850000 and profits based on Absorption costing were 955500 if the budgeted fixed cost for the period were 1837500 what was the budgeted level of activity.

    the book calculation was.

    increase in inventory of 34000 less 31000 equals 3000
    difference in profits of 955500-850500 equals 105000
    OAR 105000/3000 equals 35
    level of activity equals 1837500/35 equals 52500.

    I have done my arithmatic this way.

    change in inventory is 3000
    change in profits 105000
    OAR 1837500/105000 equals 17.50
    OAR * Change in inventory
    equals 17.50*3000 equals 52500. will my method will do in the Exam as well. Many thanks I appreciate for your help.

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