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a company had opening inventory of 48,500 and closing inventory of 45,500 units. profit based on marginal costing were $315,250 and on absorption costing were $288,250. what is fixed production overhead absorption rate per unit
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 – it has answers and explanations!
If you have watched my free lectures, you will know that the only difference between the marginal and absorption profits is the change in inventory multiplied by the fixed overheads per unit.
Here, the difference in the profits is $27,000 and the inventory changes by 3,000 units. Therefore the fixed overheads are being absorbed at the rate of 27,000/3,000 = $9 per unit.
I do explain this (and the reason for it) in my free lectures. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well 🙂
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