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

LouboutinLou1

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

Can anyone help?

Thanks,

sophie_612

please does anyone know the answer to this question? im also curious

PeterC

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

Sorry, I should have said that my last example was absorption cost

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