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Dear Sir,
can I kindly ask you to help me with these exercises?
I know one of the colleagues asked you that already some time ago underneath the lecture and you advised to ask that on the forum but I cannot find it anywhere with the answer. Please advise.Question 1:
A company manufactures a single product which is sold for $70.00 per unit. Unit costs are:$ / Unit
Variable production 29.50
Fixed production 21.00
Variable selling 4.80
Fixed selling 9.0020,000 units of the product were manufactured in a period during which 19,700 units were sold.
Using marginal costing, what was the total contribution made in the period?IS 703,290.00 the answer? to calculate total contribution we firstly have to find contribution which would be selling price minus variable production cost and variable selling cost: 70-29.5-4.8=35.70; only then we multiply units sold which is 19700 by contribution which is 35.70?
Question 2:
A company manufactures a single product. Unit costs of the product are:$ per unit
Variable production 14.75
Fixed production 8.10
Variable selling 2.40
Fixed selling 5.35400,000 units of the product were manufactured in a period, during which 394,000 units were sold. There was no inventory of the product at the beginning of the period.
Using marginal costing, what is the total value of the finished goods inventory at the end of the period?IS it: 400000-394000=6000 600×14.75? because we need to just calculate value of closing inventory? we do need to take into consideration selling cost?
Will be extremely grateful for help.
Izabela
1. Your answer to this question is correct 🙂
2. Your answer to this question is correct also. The value of inventory only ever includes production costs. 🙂
I know you get lots of that… but I just want to say big thank you, as everyone does, because your lectures are priceless… I am really glad you are here to help.
Regards,
IzabelaSir,
Can i kindly request you to help me with this question? which i attempted on opentuition acca F2 mock exams. we have only answers & not workings. Please 🙂The following budgeted information relates to a manufacturing company for next period:
Units $
Production 14,000 Fixed production costs 63,000
Sales 12,000 Fixed selling costs 12,0000The normal level of activity is 14,000 units per period. Using absorption costing the profit for next period has been calculated as $36,000.
What would be the profit for next period using marginal costing?
$ _______
> The correct answer is 27,000 $
I tried finding similar examples in kaplan book where there is only sales, cost of sales, inventory closing & opening, variable costs…
In this question its more about FIXED costs.. can u give me a brief explanation on this question please?Sir. i also tried it by contribution formula..but its sales price minus variable costs.. im really confused,please sir !
ThanksYou will know from our free lectures (and I assume that you have watched our lectures – they are a complete course for Paper F2), that the only reason marginal and absorption costing give different profits is because of fixed overheads in opening and closing inventory valuations.
Here, the fixed overhead absorption rate is $63,000 / 14,000 = $4.50 per unit.
Because production is 2,000 more than sales, the inventory will have increased by 2,000 units.
Therefore the difference in the profits = 2,000 x $4.50 = $9,000.
Because inventories have increased, the absorption profit will be higher than the marginal profit, and so the marginal profit = $36,000 – $9,000 = $27,000
I really do suggest that you watch our lectures. If you do then you don’t need a Study Text – only an Exam Kit because it is so important to get as much question practice as possible.
Good Day Mr. Moffat,
Hope your well.
I have 3 questions regarding to Marginal Costing methods.
1. I’d like to know if there is any kind of formula for finding closing inventory, esp. when both production costs & sales cost is given.
2. A company operates a standard marginal costing system. Last month its actual fixed overhead expenditure was 10% above budget resulting in a fixed overhead expenditure variance of $ 36000.
What was the actual expenditure on fixed OH last month?
A. $324,000
B. $360,000
C. $396,000
D. $400,000From this question, do we calculate by charging 110% on $ 36000? If not kindly show me how.
3. A company has the following budgeted costs & revenues:
Sales Price $50/ unit
Variable production cost $18/ unit
Fixed production cost $10/ unitIn the most recent period, 2000 units were produced & 1000 units were sold. Actual sales price, variable production cost per unit & total fixed production costs were all budgeted. Fixed production costs were over-absorbed by $ 4000. There was no opening inventory for the period.
What would be the reduction in profit for the period if the company has used marginal costing rather than absorption costing?
A. 4000
B. 6000
C. 10000
D. 14000.From this question I have two problems. 1st, I want to know which unit ( 2000 or 1000) I should be using in order to calculate the budgeted fixed overhead.
2nd, by using this information, how do i calculate the Actual OH incurred, in order to bring about the correct difference of the two costing methods. If there’s an alternative way, please do show the calculation.Thanks in advance.
With regard to your first question, there is no formula (and you can’t attempt Paper F2 by learning formulae – the examiner deliberately asks questions to check you understand rather than have just learned rules).
I am not really sure I understand what you are asking, but if you know how many units were produced and how many units were sold, then the difference will give you the increase or decrease in inventory units over the year.
For question 2:
If the variance was $36,000 and it is 10% of budget, then the budget figure must be $360,000. Since the actual is more than budget, the actual must have been $396,000.
For question 3:
If 2000 units were produced and 1000 units were sold. Then inventories must have increased by 1,000 units. Therefore the difference between marginal and absorption profits must be 1,000 x $10 = $10,000. Because inventory has increased, the absorption profit will be higher and the marginal profit will be lower by $10,000. The change in inventory x fixed overheads per unit, is the only reason ever for the difference between the marginal and absorption profits.
This is all dealt with in our free lectures. I really do suggest that you watch them because they are a complete course for Paper F2 and cover everything you need to be able to pass the exam well.
Total costs incurred at various output levels for Glaskol Ltd. for a processing operation in their Kingston factory have been measured as follows:
Output Units
11,500
12,000
12,500
13,000
13,500
14,000
Total Costs
$102,476
$104,730
$106,263
$108,021
$110,727
$113,201
Required:
Calculate:
a. The variable cost per unit
b. The fixed cost
c. The break-even output assuming the selling price per unit is $10.60
d. The target sales in units and sales dollars if Glaskol Ltd. wants to make a profit of $30,000 before taxes.
e. What is the margin of safety for Glaskol Ltd if the budgeted output is 12,500 units?In future you must start a new thread when asking about a new topic – this question is not about marginal costing.
Also, why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they contain answers and explanations.
For parts (a) and (b) you use the high-low method which is explained in our free lecture notes and the lectures that go with them.
Parts (c), (d), and (e) are not examinable in Paper MA (only in Paper PM).
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