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Hi Sir,
I don’t understand how they arrived to Under-absorption o/hd in Absorption costing method.
Under-absorbed o/h:
Period 1) -/nil , Period 2) 100, Period 3) 100 ???Please can you explain me? Thanks.
Question: A company makes and sells a single product. At beginning of period 1, there are no opening inventories of the product, for which the variable production cost is $4 and the sales price $6 per unit. Fixed costs are $2,000 per period, of which $1,500 are fixed production costs. Normal output is 1,500 units per period. In period 1, sales were 1,200 units, production was 1,500 units. In period 2, sales were 1,700 units, production was 1,400 units.
Required: Prepare profit statement for each period and for the two periods in total using both absorption costing and marginal costing.As I replied when you asked this question before, it is virtually impossible for this to be asked in Paper F5, because it is tested in Paper F2 – the F5 examiner does not ask above over and under absorption.
If you are really concerned about it then you should watch the relevant Paper F2 free lectures, but you really would be wasting your time.
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