MC and AB costing

This topic has 2 replies, 2 voices, and was last updated 10 years ago by Ken Garrett.

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October 13, 2015 at 11:50 am #276162
hammad1122
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The budget of co’s first month is
Variable production cost 45
Fix production cost. (30)
Production cost of 750boats 75
Closing inventory 250 boats (25)
Production cost 500 sold. 50
Variable selling cost. 5
Fixed selling cost. 25
=80
Profit. 10
Sales revenue. =90
If budgeted has been production using absorption costing system
If marginal closing system were used the budget profit would be
A 22500 lower
B 10000 lower
C 10000 higher
D 22500 higher
October 13, 2015 at 12:21 pm #276170
hammad1122
Member
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@hammad1122 said:
The budget of co’s first month is
Variable production cost 45
Fix production cost. (30)
Production cost of 750boats 75
Closing inventory 250 boats (25)
Production cost 500 sold. 50
Variable selling cost. 5
Fixed selling cost. 25
Total =80
Profit. 10
Sales revenue. =90
If budgeted has been production using absorption costing system
If marginal closing system were used the budget profit would be
A 22500 lower
B 10000 lower
C 10000 higher
D 22500 higher
October 15, 2015 at 9:09 pm #276567
Ken Garrett
Keymaster
- Topics: 10
- Replies: 10660
The fixed productin costs of 30,000 would be spread over the budgeted production of 750 boats: 40/boat

Under TAC $40/boat is carried forward in closing inventory ie 40 x 250 = 10,000
UNder MC all FC are written off.

Therefore, profit should fall by 10,000
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