MA - Absorption & Marginal Costing

The following data is available for period 9.

Opening inventory - 10,000 units

Closing inventory - 8,000 units

Absorption costing profit - $280,000

What would be the profit for period 9 using marginal costing?

• $278,000

• $280,000

• $282,000

• Impossible to calculate without more information

The overhead absorption rate for product T is $4 per machine hour. Each unit of T requires 3 machine hours. Inventories of product T last period were:

Units

Opening inventory - 2,400

Closing inventory - 2,700

Compared with the marginal costing profit for the period, the absorption costing profit for product T will be which of the following?

• $1,200 higher

• $3,600 higher

• $1,200 lower

• $3,600 lower

In a period where opening inventories were 15,000 units and closing inventories were 20,000 units, a firm had a profit of $130,000 using absorption costing. If the fixed overhead absorption rate was $8 per unit, the profit using marginal costing would be which of the following?

• $90,000

• $130,000

• $170,000

• Impossible to calculate without more information

Budgeted production for the month was 5,000 units although the company managed to produce 5,800 units, selling 5,200 of them and incurring fixed overhead costs of $27,400.

What is the marginal costing profit for the month?

• $45,400

• $46,800

• $53,800

• $72,800

Budgeted production for the month was 5,000 units although the company managed to produce 5,800 units, selling 5,200 of them and incurring fixed overhead costs of $27,400.

What is the absorption costing profit for the month?

• $45,200

• $45,400

• $46,800

• $48,400

In a period, a company had opening inventory of 31,000 units and closing inventory of 34,000 units. Profits based on marginal costing were $850,500 and on absorption costing were $955,500.

If the budgeted total fixed costs for the company was $1,837,500, what was the budgeted level of activity in units?

• 32,500

• 52,500

• 65,000

• 105,000

A company had opening inventory of 48,500 units and closing inventory of 45,500 units. Profits based on marginal costing were $315,250 and on absorption costing were $288,250. What is the fixed overhead absorption rate per unit?

• $5.94

• $6.34

• $6.50

• $9.00

Which of the following are acceptable bases for absorbing production overheads?

(i) Direct labour

(ii) Machine hour

(iii) As a percentage of the prime

(iv) Per unit

• Methods (i) and (ii) only

• Methods (iii) and (iv) only

• Methods (i), (ii), (iii) and (iv)

• Methods (i), (ii) or (iii) only

Under absorption costing, the total cost of a product will include:

• Direct costs only

• Variable costs only

• All direct and indirect costs excluding a share of fixed overhead

• All direct and indirect costs

A company has established a marginal costing profit of $72,300. Opening inventory was 300 units and closing inventory is 750 units. The fixed production overhead absorption rate has been calculated as $5/unit.

What was the profit under absorption costing?

• $74,550

• $74,000