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In December a firm recorded a profit of $25 000 using marginal costing principles.The opening inventory in December was 20 000 units;the inventory level had increased by 10% at the end of the month.The fixed absorption rate was $0.50 per unit.
What is the profit using absorption costing?
If you watch my free lectures you will know that the only difference ever between the marginal profit and the absorption profit is the change in inventory multiplied by the fixed overheads per unit.
Here you know the change in inventory is 200 units and you know that the fixed overheads per unit are $0.50.
Please do watch my lectures – they are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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