6. Which of the following best describes absorption costing?
7. For the past year, there was an opening inventory of 200,000 units and closing inventory of 240,000 units. Profits based on marginal costing was $300,000 and profits based on absorption costing were $400,000. If the budgeted fixed cost was $900,000, what was the budgeted level of activity?
8. The OAR has been calculated to be $16 per labour hour, for a budgeted fixed cost of $480,000. However, at the end of the period it was identified that there had been an over absorption of fixed costs by $32,000, despite there being no change in output level. What was the actual overhead for the period?
9. QH Produces and sells a single product whose variable cost is $8 per unit. Fixed costs are absorbed at the activity level of 50,000 units and have been calculated as $4 per unit. The current selling price is $20. How much profit is made under marginal costing if 100,000 units are sold?
10. The following cost card relates to a product manufactured by HG PLC.Direct Material $4
Direct Labour $12
Fixed Production Overhead $6
Variable Selling Overhead $2
Selling Price $40
20,000 units were produced during the period. If inventory was nil and every unit produced was sold, what is the total contribution earned?