Determine difference between results using marginal costing, Cost Accounting

Determine Difference between Results Using Marginal Costing and Absorption Costing

The overhead absorption rate for product X is Ksh.10 per machine hour. All unit of product X needs five machine hours. Stock of product X on 1.1.X1 was 150 units and on 31.12.X1 it was 100 units.  What is the difference in profit among results reported utilizing marginal costing and results reported using absorption costing?  Is it as?

a) The absorption costing profit would be of Ksh.2, 500 less?

b) The absorption costing profit would be of Ksh.2, 500 greater?

c) The absorption costing profit would be of Ksh.5, 000 less?

d) The absorption costing profit would be of Ksh.5, 000 greater?

Solution

The main key is the change in the volume of stock. Therefore stock levels have decreased absorption costing will report a lower profit.  This removes options (b) and (d).

Option (c) is accurate since it is based on the closing stock merely 100 units x 5 hours.

The accurate answer is (a), based on the change in stock levels x fixed overhead absorption per unit

= (150 - 100) x Ksh.10 x 5

= Ksh.2, 500 lower profit, since stock levels decreased.

Posted Date: 2/7/2013 12:02:05 AM | Location : United States







Related Discussions:- Determine difference between results using marginal costing, Assignment Help, Ask Question on Determine difference between results using marginal costing, Get Answer, Expert's Help, Determine difference between results using marginal costing Discussions

Write discussion on Determine difference between results using marginal costing
Your posts are moderated
Related Questions

With the internal rate of return, how can a company use the ROI methodology as a realistic measurement? Please discuss the pros & cons of each measurement statistic.

Definition of Variance Analysis Variance analysis can merely be defined like the process of analyzing the difference between the actual cost and the standard cost this variati

You have just been assigned to replace the current Project Manager for a very important project.  You were provided a WBS for the project planning that had already been conducted,

Identify and explain many classification of costs for planning, control, performance evaluation and decision making.

Accounting Case Study: The Champlain Career Consulting Corporation ("CCCC") is owned by three Trent graduates. Incorporated in 2009, CCCC provides a wide-range of career plann

using relevant examples discuss the meaning and scope of cost accounting

Tyler's Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those a

Your company completed the East Side subdivision. The costs are shown in Figure 11-4. The site concrete labor and outside lighting were done by subcontractors. The grading and exca

1. when using the internal rate of return method to evaluate capital spending on a new project, the project will be accepted if the internal rate of return is equal to or greater t