PAR - Unit 9 old standards - Absorption v's marginal

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I have been looking at the past centrals for DEC 1999 & June 2001. Section 2 of both papers use the original results based on absorption costing with overheads c/f in closing stock.<BR><BR>In both question, you are asked to re-do the actual results on a marginal costing basis.<BR><BR>In Dec 99, L&H&P is a semi variable cost within the cost of sales. When you do the marginal costing, the variable aspect of L,H&P is calculated by dviding the full cost of prod for LHP by the full units produced = £2.50 per unit. This is the multiplied by the units sold (22k).<BR><BR>In June 2001, General expenses is semi-variable, but is below the cost of sales line. When marginalised, the variable element is carried out at the full production units (25k) rather then the selling units (23k)<BR><BR>Can anyone explain this in basic terms?<BR><BR>Is it because the general expense are not reliant on units sold and LH&P are dependent on the units sold ?

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PAR - Unit 9 old standards - Absorption v's marginal

I'm sorry but i do not quite understand the question.<BR><BR>The essential difference is that with absorption costing a proportion of the fixed overheads is carried forward to the next accounting period through the closing stock valuation. (this is why the profit figure can be manipulated by increasing production levels to above budgeted levels)<BR><BR>with marginal costing, all fixed overheads are debited to the P & L in the relevant accounting period where they were incurred.<BR><BR>In marginal costing you list all variable costs and calculate contribution, then list fixed overheads.<BR><BR>Does this help?<BR><BR>Edit