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Dear Mr Moffat,
i am going to sit for my exam in a couple of hours and i still dont understand the operating statements under Marginal and Absorption costing given the variances in a question. is there any format or quicker way to understand it? i have gone through the lectures and i do not have enough time to go through it again.
Your swift response will be highly appreciated 🙂
Rukhsaar.
You are obviously taking the exam as computer based, and so do not worry about the format. The computer will already have the format and your job will be to type in some of the figures.
Good luck with the exam.
What i meant was how to understand the treatment of variances when ur given a budgeted profit or an actual profit to an absorption or marginal qsn. Thank u for ur wishes
You start with the budget profit and then add favourable variances and subtract adverse variances to arrive at the actual profit.
The only differences between absorption and marginal are the sales volume variance and the fixed overhead variances.
The sales volume variance is calculated using standard profit if it is absorption costing, and standard contribution if it is marginal costing.
For fixed overheads, if it is marginal costing then there is only an expenditure variance. If it is absorption costing then their is expenditure and also volume variance.
All the other variances are the same for both.
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