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Hello everyone, myself i find absorption and marginal questions tricky. what is the best approach to these 2topics. i have done Sir Johns videos very helpful, but when it comes to answering questions they are tricky
when they ask u to find the profit of marginal and you are given absorption profit or the other way round i use this formular
F.OAR = marginal profit – absorption profit / opening stock – closing stock
sometimes they give u production and sales instead of opening stock and closing stock
just replace with them
F.OAR = marginal profit – absorption profit / sales – production
When they ask u for profit difference, you can calculate both profits and find the difference or
you can justprofit difference = change in inventory multiply by F.OAR
This is what i use i dont know if it will be helpful for you.
Also note ; increase in stock level, profit from absorption increases
decrease in stock level, profit from marginal increases
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