Question 1

A bespoke furniture maker reports a profit of $50,000 using marginal costing. During the period, opening inventory was 1,000 units and closing inventory was 1,500 units. The fixed production overhead absorption rate is $10 per unit.

Calculate the profit that would be reported using absorption costing. (Enter numbers only)

Accepted Answer

1. Determine the change in inventory (Closing - Opening). 2. Multiply the change by the fixed OAR. 3. If inventory increased, add this value to marginal profit to get absorption profit.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Subtracting the $5,000 instead of adding it, resulting in $45,000.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 4

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