Dear John,
In chapter 8, example 4: "Fixed overheads of the company currently amount to $1,000,000. The management accountant has decided that 20% of these should be absorbed into the new product". However, in your calculation, fixed overhead valued $ 200,000 does not add to operation flows for tax payable calculation.
Could you please explain the reason why?
Regards
Ask the Tutor ACCA FM
Chapter 8, Example 4: why don't add fixed overhead to operation flows?
9y ago#1I explain the reason why in the lectures!! There is no point in using the lecture notes without watching the lectures - it is in the lectures that I explain and expand on the notes.
If you are not watching the lectures then you must buy a Study Text from one of the ACCA approved publishers and study from there if you wish to pass the exam.
Absorbing overheads does not mean that the total overheads will change, and we are only interested in extra cash flows to the company (i.e. overheads are only relevant if the total will change).
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