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Dear John or somebody else
I have my F2 exam this Thursday 24/11/16.
I have a question on budgeted profit.
This is from an exam paper from my tuition provider:
Q Co. has the following budgeted information available:
Cost/unit
Direct Material $24
Direct Labour $28
Variable overhead $19Fixed overheads are expected to be $500000. The following inventory information is also
available:Units
Opening inventory 4,800
Production 48,000
Sales 50,000Using a marginal costing system, what is the budgeted profit if selling price per unit is
$115?It says in the solutions that the answer is $1,700,000.
I am not sure how to work this out.
Can someone help me please on short notice. I would really appreciate it. Thanks :).
Jegan
Sales – ($115 x 50000) 5750 000
Less : cost of production
Opening inventory – 4800 x $71 : $340800
Materials – 48000 x $24 : 340800
Labour – 48000 x $28 : 1344000
Variable overheads – 48000 x $19 : 912000
Total ———–$3748800
Less : Closing inventory – 2800 x $71 : ($198800)
—————–$3550000
Contribution ———– $2200000
Less fixed overheads ——-$500000
Marginal profit $1700000mikuz: Thank you for the answer (although you have done it a very long way round!), but please don’t answer in this forum, because it is Ask the Tutor Forum (but please do help people in the other F2 forum)
jegan: The contribution per unit = 115 – (24 + 28 + 19) = $44
They sell 50,000 units, so the total contribution = 50,000 x 44 = 2,200,000
The fixed overheads are 500,000, to the profit = 2,200,000 – 500,000 = 1,700,000
(I do suggest that you watch my free lectures on marginal and absorption costing! The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.)
Thank you John sir and Mikuz,
Much appreciated. I passed my F2 exam today with a mark of 70%.
I would like to thank Opentuition for the excellent resources available 🙂
Jegan
Congratulations on passing (and with such a good mark) – that is great news 🙂
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