Practice exam Osbourne Book task 4

Hi All
I am struggling with the enclosed task to see how they get the answer for the opening inventory. I have enclosed the question, any help much appreciated.
Thanks

Comments

  • Ekaterina_SEkaterina_S Registered Posts: 12
    Opening inventoty for month 2 would be the same as closing inventory for month 1. To find out closing inventory for month 1( in units) : Opening inventory + Production- Sales. In this case it is 0 + 8000-6500=1500 units. So, opening inventory for month 2 is 1500 units.
    Then closing inventory for moth 2 is: 1500+8000-7500=2000 units. And it is the opening ventory for month 3.
    I hope it hepls.
  • jodyewhitejodyewhite AAT Student Posts: 35
    Hi Ekaterina
    Many thanks for your answer, I still don't see how they get the answer.
    Opening inventory
    month 2 £177,000, month 3 £236,000 and for the marginal £120,000 and £160,000. Do you know how they come to this figure.
    Many Thanks
  • Ekaterina_SEkaterina_S Registered Posts: 12
    Hi
    You need to calculate production absorption and marginal cost per unit and then multiple it by opening inventory number of units.
    Absorption cost per unit: Direct materials+Direct labour+Variable production overheads+ Fixed production overheads= £35+£25+(£160000/8000)+(£304000/8000)= £118 per unit.

    Opening inventory: £118*1500=£177000. The same for month 3 but pay attention variable production overheads in month 3 is £1680000.

    Marginal cost will be £35+£25+(£160000/8000)=£80

    Opening inventory: £80*1500=£120000.

    If you have any question I will try to answer them.

    I hope that helps.

  • jodyewhitejodyewhite AAT Student Posts: 35
    Hi Ekaterina
    Many Thanks I understand now, just had a complete memory freeze. So much to remember, have you worked through the Osborne book.
    How did you find the exam.
    Thanks again Jo
  • Ekaterina_SEkaterina_S Registered Posts: 12
    Hi Jo
    I have only completed one practise assessment from Osborne book as we had BPP boks for this subject. I think exam wasn't too bad but I wouldn't mind extra time. If you are stuggling with task, flag it and go to the next one. And try again after you go through all of them.

    Good luck with your exam.
  • jodyewhitejodyewhite AAT Student Posts: 35
    Many Thanks for all your help, and good luck with your results.
  • Ekaterina_SEkaterina_S Registered Posts: 12
    Thank you
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