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Hi Sir,
I don’t understand how they arrived to Under-absorption o/hd in Absorption costing method.
Under-absorbed o/h:
Period 1) -/nil , Period 2) 100, Period 3) 100 ???Please can you explain me? Thanks.
Question: A company makes and sells a single product. At beginning of period 1, there are no opening inventories of the product, for which the variable production cost is $4 and the sales price $6 per unit. Fixed costs are $2,000 per period, of which $1,500 are fixed production costs. Normal output is 1,500 units per period. In period 1, sales were 1,200 units, production was 1,500 units. In period 2, sales were 1,700 units, production was 1,400 units.
Required: Prepare profit statement for each period and for the two periods in total using both absorption costing and marginal costing.You must ask in the Ask the Tutor Forum if you want me to answer – this forum is for students to help each other.
However, the chances of this being asked in Paper F5 are almost impossible because it is tested in Paper F2. If you really are interested then you need to watch the free F2 lectures on this topic. I do think that you would be wasting your time however.
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