Day: November 16, 2021

A business produces a single product:

• opening stock  —  5,000 units
• production  —  15,000 units
• closing stock  —  2,000 units

The variable production cost per unit is £10 and the fixed production cost is £60 000.

The sales revenue is £360 000.

Profit is £108 000 based on full absorption costing.

What is the profit based on marginal costing?

Select ONE answer:

1. £8,000 Higher
2. £8,000 Lower
3. £12,000 Higher
4. £12,000 Lower

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

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

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

The answer is 3

1. Not correct
2. Not correct
3. Correct
4. Not correct

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