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Management accounting Question

AAdnan1y ago
if we have fixed production cost of $105,000 and a profit of $210,000 under absorption costing with opening inventory of 30,000 units and sale of 35,000 units, what will be the profit under marginal costing? Will it be higher then absorption costing i-e $22,7500 or 192,500?? Please answer
John MoffatJohn MoffatTutor1y ago#1
The answer depends on how many units they are producing. If they produce more than 35,000 then the inventory will increase over the period and absorption costing will give a higher profit. If they produce less than 35,000 then the inventory will fall over the period and so marginal costing will give a higher profit. This is all explained in my free lectures on absorption and marginal costing. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well :-)
AAdnan1y ago#2
Thank you so much for your response, much appreciated, I will go through your lectures and notes:)
John MoffatJohn MoffatTutor1y ago#3
You are welcome :-)
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