A company manufactures a single product and reports profits under both marginal and Full (absorption) costing.
Data for the month:

• Selling price: £55 per unit
• Variable production cost: £32 per unit
• Budgeted fixed production overhead: £160,000 per month
• Normal activity level used to set the OAR: 20,000 units per month
• Actual fixed production overhead incurred: £170,000
• Fixed non-production costs: £60,000 per month
Operational data: Production 22,000 units; Sales 19,000 units; No opening inventory.
Which pair of monthly profits is correct?

Question

A company manufactures a single product and reports profits under both marginal and Full (absorption) costing. 
 Data for the month:  
 
 • Selling price: £55 per unit  
 • Variable production cost: £32 per unit 
 • Budgeted fixed production overhead: £160,000 per month 
 • Normal activity level used to set the OAR: 20,000 units per month  
 • Actual fixed production overhead incurred: £170,000 
 • Fixed non-production costs: £60,000 per month 
 Operational data: Production 22,000 units; Sales 19,000 units; No opening inventory. 
 Which pair of monthly profits is correct?

Accepted Answer

Full (absorption) costing profit £231,000; Marginal (variable) costing profit £207,000

Answer

Full (absorption) costing profit £207,000; Marginal (variable) costing profit £231,000

Answer

Full (absorption) costing profit £201,000; Marginal (variable) costing profit £207,000

Answer

Full (absorption) costing profit £225,000; Marginal (variable) costing profit £207,000

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A company manufactures a single product and reports profits under both marginal ...

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