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MA FA. Chapter 10, Quiz, Question 5

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › MA FA. Chapter 10, Quiz, Question 5

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by AvatarJohn Moffat.
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  • February 19, 2024 at 10:35 am #700670
    AvatarDilshod1999
    Participant
    • Topics: 1
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    • ☆

    Could you please explain the calculations and the general meaning of the question

    February 20, 2024 at 7:33 am #700707
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54839
    • ☆☆☆☆☆

    I assume that you have watched my free lectures, in which case you will know that the only difference ever between the marginal and the absorption profits is the change in the inventory multiplied by the fixed overhead absorption rate.

    Given that they produced 2,000 units more than they sold, the inventory must have increased by 2,000 units. The absorption rate is $63,000/14,000 = $4.50 per unit.

    Therefore the profits are different by 2,000 x $4.50 = $9,000.

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