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Hi sir,
” A company had opening inventory of 52500 units and closing inventory of 49500 units. Profits based on marginal costing were $515250 and on absorption costing were $488250. What is the fixed overhead absorption rate per units? ”
The solution is
(515250-488250)/(52500-49500)=$9.
I just confused about the process.The difference between marginal and absorption profits is always the change in inventory multiplied by the fixed cost per unit.
This is a Paper F2 topic and is extremely unlikely to be examined in Paper F5 (it never has been asked !!). If you want to be safe then you should watch the Paper F2 lectures on marginal and absorption costing.
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