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the following information relates to a manufacturing company for next period
UNITS $
production 14000 fixed production cost 63000
sales 12000 fixed selling cost 12000using absorption costing the profit for next period has been calculated as $ 36000.
what would be the profit for marginal costing??
sir would you help me in solving this question.it was given in a class test
If you have watched my free lectures on this then you will know that the only difference ever between the absorption profit and the marginal profit is the change in inventory multiplied by the fixed overhead cost per unit.
The fixed overheads per unit are 63,000/14,000 = $4.50.
The inventory is increasing by 14,000 – 12,0000 = 2,000 units
Therefore the marginal profit will be lower than the absorption profit by 2,000 x $4.50 = $9,000.
Do watch my free lectures on this. 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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