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You have calculated marginal profit as $200000, and absorption proit $180000. Overhead absorption of $4000. Actual production is 5000 units . What is the unit sold?
Please do not simply set me test questions!!
You must have an answer in the same book as you found the question, and this forum is for you to ask about things you don’t understand – not to simply demand answers.
Also, do check you have copied the question correctly, because as you will see the answer is a bit extreme.
If 4,000 overheads were absorbed it means that the absorption rate is 4000/5000 = $0.80 per unit.
The difference between marginal and absorption profits is the change in inventory x absorption rate. So the change in inventory is 20,000 / 0.80 = 25,000 units.
Because marginal profit is higher than absorption it means that the inventory must have fallen, so the sales must have been 25,000 more than the production and were therefore 30,000 units.
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