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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Marginal costing profit
The standard cost card and selling price details for product Alpha are as follows:
($/unit)
Direct materials : 8$
Direct labour: 8.50 $
Variable overhead: 3.50 $
Fixed overhead absorption rate : 4 $
Total costs = 24 $
Profit= 11$
Selling price= 35$
You are also given the following information at the month end:
Budgeted production for the month: 4000 units
Actual production for the month : 6500 units
Actual sales for the month : 8100 units
Fixed overhead costs : $30000
All other unit costs and revenues are as budgeted.
Calculate the marginal costing profit for the month.
Sir, i tried the contribution/unit method where total variable costs = 20$ , selling price = 35$ ..which makes 15 $ contribution
Total contribution= 8100* 15= 121500$
Then marginal costing profit i calculated by deducting the overheads of 30000 $ from the contribution which makes 91 500$..
But the thing is that there is a decrease in inventory of 1600 units..i cant arrive to the answer of 61500 $..please sir could u explain where i went wrong 🙁
Assuming that you have typed the question correctly, then the profit is 91,500.
It seems there must be a typing error in your book – the change in the inventory level does not affect it.
Thanks a lot sir!! 🙂
I think there should have been a mistake.
You are welcome 🙂
