Accounting Multiple Choice Question – 21 November 2017

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Table 18

What would be the difference between the profit for the month using absorption costing and the profit for the month using marginal costing?

Select ONE answer:

  1. Absorption costing profit would be £500 lower
  2. Absorption costing profit would be £1,500 higher
  3. Absorption costing profit would be £1,500 lower
  4. Absorption costing profit would be £3,000 higher
  5. Absorption costing profit would be £3,000 lower

Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 2 – There has been an increase of 50 units in inventory. Each one has absorbed £30 of overhead (£5*6 hours) which means that £1,500 of extra profit in the month will have been generated by an increase in current assets.

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