11 Questions
What was the total Variable selling Expenses for the second half of 2022?
GHS120,000
How many units did BDC Company Ltd produce in the first half of 2022?
7,550 units
What is the machine hour absorption rate as conventionally calculated for department A?
GHS14
How much were the budgeted overheads for the management consultancy in one year?
GHS615,000
By how much were the overheads under-absorbed for the management consultancy?
GHS35,000
What was the actual overheads cost for the management consultancy?
GHS694,075
If a company does not hold any opening or closing inventories, which costing method will result in higher profits?
Marginal costing
In the scenario provided, what is the total fixed cost based on the total costs mentioned?
GHS4,000
If a company produced 1500 units and 2500 units at different total costs, what would be the total cost of producing 2000 units?
GHS5,000
In a scenario where there is opening stock but no closing stock, what happens to profit under absorption costing compared to marginal costing?
Higher than marginal costing
Given the cost details for XYZ Company Ltd, how would you calculate the under or over-absorption of overheads for the second half of 2022?
Use a GHS362,250 under-absorption
Study Notes
Absorption Costing vs Marginal Costing
- If a company does not hold any opening or closing inventories, profits will be the same if either absorption costing or marginal costing is used.
- Absorption costing and marginal costing are two different methods of costing, with different approaches to handling fixed costs.
Costing and Production
- Total cost of producing 1500 units and 2500 units can be calculated using the given data.
- The total fixed cost can be calculated using the total cost of producing 1500 units and 2500 units.
Opening Stock and Closing Stock
- If there is opening stock but there is no closing stock, then profit under absorption costing will be higher than the marginal costing.
XYZ Company Ltd
- XYZ Company Ltd recorded the following cost for the first half of 2022: Selling Price per unit, Direct Material cost per unit, Direct Labour cost per unit, variable production cost per unit, Fixed production cost per unit, and direct expenses per unit.
- The company produced 7550 units and sold 7150 units during the period under review.
- The normal budgeted activity level per annum is 15600 units.
Under or Over-absorption of Overheads
- Under or over-absorption of overheads can be calculated using the given data.
- The calculation takes into account the normal budgeted activity level per annum.
BDC Company Ltd
- BDC Company Ltd recorded the following cost for the first half of 2022: Selling Price per unit, Direct Material cost per unit, Direct Labour cost per unit, variable production cost per unit, Fixed production cost per unit, and direct expenses per unit.
- The company produced 7550 units and sold 7150 units during the period under review.
- The normal budgeted activity level per annum is 15600 units.
Marginal Costing Profits
- Marginal costing profits can be calculated using the given data.
- The calculation takes into account the normal budgeted activity level per annum.
Machine Hour Absorption Rate
- Machine hour absorption rate can be calculated using the given data.
- The calculation takes into account the budgeted machine hours and actual machine hours.
Overhead Absorption Rate
- Overhead absorption rate can be calculated using the given data.
- The calculation takes into account the budgeted overheads and actual overheads.
- The overhead absorption rate per hour can be calculated using the given data.
Test your knowledge of cost accounting concepts with these questions related to absorption costing, marginal costing, fixed costs, and production units. Determine the correct statements about profits and total fixed costs based on the given scenarios.
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