Stuck again

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Primble
Primble Registered Posts: 734 Epic contributor 🐘
am doing questions in the Osborn MAC book. was looking at 1.3ai and cant work out how they got their closing stock figure. so here is the question...
a company manufactures 1 product, the budgeted production is 4000 units per week. during the first 2 weeks it had costs exactly as budgeted of
direct materials £5000
direct labour £9000
fixed overheads £6000

the company had no finished goods in stock at the start of week 1. in both weeks they produce 4000 units. sale in week one were 3000 units and in week 2 they sold 5000 units all at £8 each.

both direct mat and lab are behave as variable costs.
prepare a profit statement for both weeks on an absorption costing , absorbing fixed overheads on a per unit basis.

i want to do
week 1 week 2
sales 24000 40000
less: opening stock 0 8000
direct materials 5000 5000
direct labour 9000 9000
fixd overheads 6000 6000
closing stock (8000) o
(12000) (28000)

profit 12000 12000

but book makes week 1 closing of £5000 so profit £9000 then the 5000 is c/f to result in week 2 profit of 15000. what have missed?

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  • jojoscottison
    jojoscottison Registered Posts: 21 New contributor 🐸
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    If you absorb fixed overheads on a per unit basis,
    then the fixed overhead would be £6000/4000=£1.5/unit
    direct material would be£ 5000/4000=£1.25/unit
    direct labour would be£ 9000/4000=£2.25/unit
    cost of per unit would be £1.5+1.25+2.25=£5/unit

    week 1
    sale:3000*8=24000
    cost of sale 3000*5=15000
    profit:9000

    week 2
    sale:5000*8=40000
    cost of sale:5000*5=25000
    profit :15000
  • Primble
    Primble Registered Posts: 734 Epic contributor 🐘
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    If you absorb fixed overheads on a per unit basis,
    then the fixed overhead would be £6000/4000=£1.5/unit
    direct material would be£ 5000/4000=£1.25/unit
    direct labour would be£ 9000/4000=£2.25/unit
    cost of per unit would be £1.5+1.25+2.25=£5/unit

    week 1
    sale:3000*8=24000
    cost of sale 3000*5=15000
    profit:9000

    week 2
    sale:5000*8=40000
    cost of sale:5000*5=25000
    profit :15000

    cool thanks
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