• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

New! BPP Books for ACCA September 2022 Exams are now available, get your discount code >>

kaplan practice exam question 23

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › kaplan practice exam question 23

  • This topic has 5 replies, 3 voices, and was last updated 11 months ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • July 26, 2021 at 11:53 am #629467
    tushargujral
    • Topics: 63
    • Replies: 93
    • ☆☆

    23
    Below is the standard cost card for one unit of product K.
    $/unit
    Selling price 35
    Direct materials 20
    Direct labour 4
    Variable overhead 1
    Fixed overhead 6

    Production was 50,000 units and sales 60,000 units. The opening inventory was 25,000 units. The
    profit calculated using marginal costing was $180,000.
    What is the profit using absorption costing?

    $30,000
    $120,000
    $210,000
    $240,000

    in solution, they have calculated the closing- opening as (15000-25000)x 6

    I dont get how they get 15000

    July 26, 2021 at 12:43 pm #629475
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49595
    • ☆☆☆☆☆

    Given that the opening inventory was 25,000 and they sold 10,000 more than they produced, the closing inventory must be 15,000 units.

    In fact you did not even need to calculate the closing inventory. As I explain in my free lectures, the only difference ever between the marginal profit and the absorption profit is the change in inventory multiplied by the fixed overheads per unit.

    Given that they sold 10,000 more than they produced, the inventory must have changed by 10,000 units over the period, and 10,000 x $6 = $60,000 which is the difference in the profit.

    July 29, 2021 at 6:34 am #629734
    tushargujral
    • Topics: 63
    • Replies: 93
    • ☆☆

    yes sir I know the fact we don’t need to calculate the closing inventory but was reviewing the answer to what they have calculated put me thinking how did they work out

    July 29, 2021 at 8:46 am #629764
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49595
    • ☆☆☆☆☆

    Has the first line of my previous reply now made it clear?

    July 30, 2021 at 3:51 am #629813
    johnbriane
    • Topics: 146
    • Replies: 147
    • ☆☆☆

    Can we calculate the closing inventory like this sir

    Opening inventory 25000
    (Add) purchases / production 50000
    ( less) sales -60000

    Which gives us 15000 units
    So can we calculate closing inventory from this manner as well in any absorption or marginal costing question?

    And will we get the correct closing inventory ultimately?

    July 30, 2021 at 10:13 am #629842
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49595
    • ☆☆☆☆☆

    Yes, you can calculate the closing inventory like that. However, as I explained in my previous reply (and in my free lectures) we do not actually need to know the closing inventory in this question – only the change in inventory over the period.

    It is only relevant for questions asking for the absorption profit when we are given the marginal profit (or asking for the marginal profit when we are given the absorption profit).

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate

If you have benefited from OpenTuition please donate.

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • Manuga on ACCA AB Chapter 16 – How an individual can develop – Questions
  • Manuga on ACCA AB Chapter 16 – How an individual can develop – Questions
  • John Moffat on Discounted Cash Flow Further Aspects, Lease versus Buy – ACCA Financial Management (FM)
  • John Moffat on Accounting for Management – ACCA Management Accounting (MA)
  • ngtuanthungoc on FA Chapter 4 Questions Accruals and Prepayments

Copyright © 2022 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy