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F2 – P.51 Ch. 9 Ex. 3

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › F2 – P.51 Ch. 9 Ex. 3

  • This topic has 3 replies, 3 voices, and was last updated 7 years ago by John Moffat.
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  • December 2, 2015 at 10:04 am #286932
    sano1987
    Member
    • Topics: 32
    • Replies: 15
    • ☆

    Hello John,

    Could you please kindly explain the example 3 at page 51.

    Thank you

    December 2, 2015 at 10:51 am #286946
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    As you will have seen in the lectures that work through examples 1 and 2, if inventory increases the absorption costing gives the higher profit and if inventory decreased then marginal costing gives the higher profit.

    For example 3, if production is more than sales, then inventory increases (so absorption gives the higher profit). If production is less than sales, then inventory decreases (so marginal gives the higher profit.
    Only if the inventory does not change (which is when production = sales) will both give the same profit.

    (I do assume that you are watching the lectures – the lecture notes should not be used on their own because it is in the lectures that we explain and expand on the notes.)

    December 6, 2015 at 2:45 am #288070
    shwe
    Member
    • Topics: 4
    • Replies: 2
    • ☆

    Morning Jhon !

    Can you help me this Question that

    The prime cost of a product is the sum of the labour and material costs that are identifiable to individual unit of the product .
    Answer is True or Fale ?
    If False , why ?
    cause Prime cost is direct cost
    labour & material is direct cost . right ?
    Why false
    Thanks

    December 6, 2015 at 7:19 am #288103
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    Prime cost is usually just labour plus material.

    However there could be other costs identifiable with individual units (e.g. royalties) and they would be included in prime cost as well.

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