- This topic has 9 replies, 3 voices, and was last updated 10 years ago by
.
- Posts
A company budgeted to produce 3000 units of a product in a period at a budgeted cost p.u. as follows
Direct costs 12
Variable Ohds 5
Fixed Ohds 9
Total 26
In the period covered by the budget:
(a) Actual sales were 3500 units &; finished inventory decreased by 300 units.
(b) Actual fixed overhead expenditure was 5% more than budgeted, all other costs were as budgeted.A- Overheads were over absorbed by 450
B- Under absorbed by 450
C- Over absorbed by 1450
D- Under absorbed by 1450I have got that budgeted overheads would be 27000, Actual would be 28350. But how to find out absorbed overheads?? I’m confused about point (a)
The fixed overheads absorbed are actual production x fix o/h absorption rate
The actual production is 3,200 units; the fix o/h’s are 9 per unit.
So total absorbed is 3200 x 9 = 28800(This is more than actual, so there is over-absorption of the difference)
The sales were 3,500 units, but 300 of them came from reducing the inventory, so only 3,200 units were produced.
hi Sir
please about this case, I’m confused. the case says ” finished inventory decreased by 300 units”. I thought finished inventory were decreased by 300 because 3500u were sold. I though I will mean 3800 (3500 + 300) were produced and after selling 3500, the closing stock is 300 . Help It’s very confusing as English is not my first language.
thanksIf finished inventory decreased by 300, it means that the inventory at the end of the year was 300 less than it was at the start of the year.
So what happened to those 300 units? They must have been sold. So since in total there were 3500 sold, then if 300 of them came out of the inventory then the remainder (3500-300= 3200) must have been produced extra.
ok, it means those 300 u were from last year and are opening inventory this year?
ok thanks
- You must be logged in to reply to this topic.