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# Practice exam Osbourne Book task 4

AAT Student Posts: 35
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

• 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.
• AAT Student Posts: 35
Hi Ekaterina
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
• 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.

• 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
• 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.