Marginal Vs Absorption
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Beckyyy
Registered Posts: 2
If someone could help me work out the answer to this question, that would be great.
Calculate the inventory valuation per unit using both marginal and absorption costing.
Direct Material £10 per unit
Direct Labour £7 per unit
Variable Overhead £3 per unit
Budgeted Production 4,000 units
Budgeted Fixed Production Overhead £40,000
Budgeted Non-production Overhead £60,000
Actual Production 4500 units
Actual Fixed Production Overhead £50,000
Actual Non-production Overhead £55,000
Calculate the inventory valuation per unit using both marginal and absorption costing.
Direct Material £10 per unit
Direct Labour £7 per unit
Variable Overhead £3 per unit
Budgeted Production 4,000 units
Budgeted Fixed Production Overhead £40,000
Budgeted Non-production Overhead £60,000
Actual Production 4500 units
Actual Fixed Production Overhead £50,000
Actual Non-production Overhead £55,000
0
Comments
-
Hello,
To help you reach the answer:
- The difference between marginal and absorption costing lies the treatment on fixed production overheads
- Marginal costing includes only variable costs / Absoption costing will include production overheads
To calculate:
- Calculate marginal cost per unit (variable cost per unit)
- Calculate Overhead Absorption Rate from the budgeted figures
- Use this figure to calulate Absorption Cost per unit
In the above you may find there has been an over/ under absorption of overheads ?
Have a go and see how it goes
0
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