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Hello Sir,
25,000 units of a company’s single product are produced in a period during which 28,000 units are sold. Opening inventory was 7,000 units. Unit costs of the product are:
Direct costs – $ 16.20
Fixed Production O/H – $ 7.60
Fixed Non-Production O/H – $ 2.90What is the difference in profit between absorption and marginal costing?
This got me really confused. Need your help Sir.
Thank you so much ?
I guess that you have not watched my free lectures on absorption and marginal costing!!
If you had, then you would know that the only difference ever between marginal and absorption profits is the change in inventory multiplied by the fixed production overheads per unit.
Here, the inventory has fallen by 3,000 units (28,000 – 25,000), and the fixed production overheads are $7.60 per unit.
Therefore the difference between the profits is 3,000 x $7.60
I do suggest that you watch the lectures. They are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Thank you so much Sir.
My apologies for not being able to thank on time. I was a bit hasty with my exam.
Today I’ve passed my MA1 exam. I’ve scored 88%.
Thank you for helping us students. It’s very kind of you Sir. 🙂
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