Qn help

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March 27, 2015 at 9:42 pm #239264
Jonathan
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A company uses standard absorption costing. Its fixed overhead absorption rate is £8 per machine hr and each unit of production take 3 machine hrs.
Last year was an opening inventory of finished good of 4,000 units. They produced 30,000 units and sold 25,000. The actual profit last year was £526,000
What profit would have been earned under a standard marginal costing system?
Ans. supposed to be 406,000
March 29, 2015 at 10:24 pm #239481
michael
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I think it goes smth like this:
since produced>sold, then absorption costing profit would be more than marginal.
the difference would be 5000*8*3=120k.
then you deduct this 120k from 526k and come to 406k.
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