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Hello!Would you please help me with that question:
Jump nad Duck Co manufactures BB guns.The following is the relevant data:
Sale prise 78/unit
Direct material 15/unit
Direct labour 32/unit
Indirect material 6/unit
Indirect material 8/unit
Factory rent 200 000/month
Normal production capacity is 40 000 units whereas actual units produced are 35 000 and units sold are 32 000.All cost other than rent are variable cost.
What is teh difference in total product cost for actual units prodused calculated under Absorption costing method and Marginal costing method?
A 2 135 000
B 200 000
C 2 310 000
D 175 000The production is 35,000 units.
The only difference in unit cost between marginal and absorption costing is the fixed production overheads per unit.
From the question, the only fixed production cost is the rent. This is always absorbed on budgeted figures and so is charged at 200,000/40,000 = $5 per unit.
So the difference in the cost of total production will be 35,000 x $5 = $175,000 (D)
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