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Hi, May I know if the questions gives us 3 figures the budgeted production, actual production and actual sales (5000,5800,5200 respectively), which figures do we use in the calculation of marginal and absorption costing?
In the calculation of marginal costing, we use the actual production figure (5800) as it represents the actual level of output. Marginal costing only considers variable costs and does not include fixed production overheads.
In the calculation of absorption costing, we use the budgeted production figure (5000) as it represents the planned level of output. Absorption costing includes both variable and fixed production costs, so the budgeted production figure is used to allocate the fixed production overheads.
The figure of 5800 would be used in the calculation of marginal costing, and the figure of 5000 would be used in the calculation of absorption costing.
Hi sorry I have another doubt. Since sales is 5200 units, and the budgeted production is 5000 units, does that mean that we have to do opening inventory of 200 units ?
Based on your information given, the figures to be used in the calculation of marginal and absorption costing.
For marginal costing:
– Actual production figure: 5800 units
– Actual sales figure: 5200 unitsFor absorption costing:
– Budgeted production figure: 5000 units
– Actual sales figure: 5200 unitsTo calculate the opening inventory, we need to subtract the units sold from the production figure.
In this case, the opening inventory would be 5800 – 5200 = 600 units. Therefore, the opening inventory would be 600 units, not 200 units.Please note that the figures provided in this answer are based on the information you have given to me……. and may not reflect the complete context of the question.
Hi, the information are as follows. Thank you for your help so far.
I have been calculating for a long time but unable to get the answer.
Would appreciate it if you could help me with this.
Direct materials 6.00
Direct labour 7.50
Variable overhead 2.50
Fixed overhead absorption rate 5.00Selling price 30.00
Budgeted production for the month was 5,000 units through the company managed to produce 5,800 units, selling 5,200 of them and incurring fixed overhead costs of $27,400.I am struggling to find out what you are asking me to do …..if I am being honest
Where is the question from?
Can you not read the answer?Hi, my apologies. I’m supposed to find the profit under both methods (absorption and marginal costing)
I think it is
Based on the information provided.
Using marginal costing:
Direct materials cost per unit: $6.00
Direct labor cost per unit: $7.50
Variable overhead cost per unit: $2.50
Total variable cost per unit: $6.00 + $7.50 + $2.50 = $16.00Total variable cost for 5,800 units: $16.00 * 5,800 = $92,800
Fixed overhead costs: $27,400
Total cost using marginal costing: Total variable cost + Fixed overhead costs = $92,800 + $27,400 = $120,200
Using absorption costing:
Fixed overhead absorption rate: $5.00 per unitTotal fixed overhead costs for 5,800 units: $5.00 * 5,800 = $29,000
Total cost using absorption costing: Total variable cost + Total fixed overhead costs = $92,800 + $29,000 = $121,800
Therefore, the total cost incurred for producing 5,800 units and selling 5,200 units is $120,200 using marginal costing and $121,800 using absorption costing
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