AAT LEVEL 4 Management Accounting: Decision & Control - Task 4 Assessment 1 / osborne books

Completely clueless on this question, have looked through books but can't find any examples?

Can anyone help?

Thanks,

Comments

  • sophie_612
    sophie_612 LondonRegistered Posts: 136
    please does anyone know the answer to this question? im also curious
  • PeterC
    PeterC Registered, Tutor Posts: 236
    Hi Sophie
    This is similar to the one you just asked about, only this time they want the profit for month 2 as well as month 3.

    For the month 2 profit, the closing inventory is based on month 2 costs and the opening inventory is based on month 1 costs

    For example, in month 1

    Material = £35 per unit
    Labour = £25 per unit
    Variable overhead = £160,000/8,000 units = £20 per unit
    Fixed overhead = £304,000/8,000 units = £38 per unit
    Total cost = 35+25+20+38 = £118 per unit

    Inventory at end of month 1/beginning of month 2 = £118 x (8,000 - 6,500) = £177,000
  • PeterC
    PeterC Registered, Tutor Posts: 236
    Sorry, I should have said that my last example was absorption cost

    Marginal cost is 35+25+20 = £80 per unit
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