A company manufactures and sells a single product. For this month the budgeted fixed production overheads are $48,000, budgeted production is 12,000 units and budgeted sales are 11,720 units.The company currently uses absorption costing.If the company used marginal costing principles instead of absorption costing for this month, what would be the effect on the budgeted profit?
A、$1,120 higher
B、$1,120 lower
C、$3,920 higher
D、$3,920 lower
A、$1,120 higher
B、$1,120 lower
C、$3,920 higher
D、$3,920 lower
【参考答案及解析】
Fixed production overhead absorption rate =$48,000/12,000 units = $4 per unit Increase in inventory levels = (12,000 - 11,720) units = 280 units ... Difference in profit = 280 units x $4 per unit = $1,120 Marginal costing profits are lower than absorption costing profits when inventory levels increase in a period, therefore marginal costing profit will be $1,120 lower than absorption costing profits for the same period.
Fixed production overhead absorption rate =$48,000/12,000 units = $4 per unit Increase in inventory levels = (12,000 - 11,720) units = 280 units ... Difference in profit = 280 units x $4 per unit = $1,120 Marginal costing profits are lower than absorption costing profits when inventory levels increase in a period, therefore marginal costing profit will be $1,120 lower than absorption costing profits for the same period.