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sir, i am really confused on how to working backwards.. how do i get the variable production cost per unit like for example, when im only given the opening inv (6000units), closing inv(4000units), how the closing inv was valued($33,000), marginal costing profit ($50,000) and absorption costing profit($41,000)
im confused on how do i get the variable production cost per unit..
It depends whether the closing inventory was valued using marginal costing or absorption costing.
If it is marginal costing then you simply divide by the number of units.
If it is absorption costing, then dividing by the number of units gives the full cost per unit.
You can calculate the fixed cost per unit using the method I explain in my lectures.
(The difference in profits is equal to the change in inventory (in units) multiplied by the fixed cost per unit).
Subtract the fixed cost from the total cost per unit, and you are left with the variable cost per unit.
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