I have this (for me) tricky question, that I don't seem to understand:
A company manufactures and sells a single product. In two consecutive months the following levels of production and sales (in units) occured:
Month 1 Month 2
Sales 3800 4400
Production 3900 4200
The opening inventory for Month 1 was 400 units. Profits or losses have been calculated for each month using both absorption and marginal costing principles.
Which of the following combination of profits and losses for the two months is consistent with the above data:
The Answer
Absorption costing
Month 1 - 200, month 2 - 3200
Marginal costing
Month 1 - (400), month 2 - 4400
I get the other questions on stock in marginal and absorption costing correctly, but this one.....it is a mystery to me...
Anybody...please.....
-- Edited by BJA on Saturday 10th of March 2012 05:52:45 PM
I don't know? There seems to be something missing from the question as the first part is talking in units but the second part is in profit & loss.
Do the other potential answers give any further clues with this one.
Is this one from an old exam paper or a book?
Sorry about this one. I'm sure that I must be missing something basic in the question but I'm not seeing it at all.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think that we both fell into exactly the same trap of trying to find something to calculate where the question is looking at general principles rather than the specifics of the calculation. And actually, there is nothing to calculate and the numbers are meaningless.
In month 1 production is greater than sales so Absorbtion costing will be greater than marginal costing which drops out answers B and D.
In month 2 production is less than sales so we need an answer where marginal costing is greater than absorbtion costing which leaves us with answer C.
To my mind a damn awful question with no right being in an ACCA exam paper where one would expect to actually be calculating the answers rather than loking for a this is greater than that and less than that so this must be the answer but the figures that I have in the question mean absolutely nothing.
Right, that's another examiner for my list of those to be taken behind the back of a building and shot.... It's becoming a pretty long list at the moment!
Good luck for Monday,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
