Accounting Multiple Choice Question – 4 February 2022

A company calculates its profit using marginal costing as £90 000 for a month.

Opening inventory was 4000 units and closing inventory 6000 units.

The fixed production overhead absorption rate is £20 per unit.

What is the profit under absorption costing?

Select ONE answer:

1. £10 000
2. £50 000
3. £130 000
4. £170 000

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 ==> (6,000 – 4,000) * £20 ==> £40,000 + £90,000 ==> £130,000
4. Not correct

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