Online Mock on the AAT website paper 1 question 1.3


could anybody help me with how they have worked out the production costs for this question?

I have worked out the sales and the opening inventory but can't seem to work out how they got the production costs.

Thank you
I'm currently studying AAT Level 4! as part of my Finance Apprenticeship


  • farrar
    farrar Registered Posts: 7
    Production Cost

    10,000 units produced
    Direct Material = £15/unit x 10,000 = £150,000
    Direct Labour = £10/unit x 10,000 = £100,000
    Other Variable Costs = £250,000
    TOTAL =£500,000

    Marginal Production Cost = £500,000
    Absorption Production Cost = £950,000 (absorption production cost includes 450k of fixed overheads)

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