Hi guys,

I have an absorption costing query on the profit statement, here are the notes:

Selling price per unit = 20
Sales for year 1 = 10,000
Production = 20,000
Production Cost Per Unit = 10

YEAR ONE
Sales (20 x 10,000) 200,000
Cost Of Sales::

Opening Stock (10 x 0) 0
Cost of Prod (10 x 20,000) 200,000
----------
200,000
-C/Stock (10 x 10,000) (100,000)
-----------
Cost Of Sales (100,000)
GROSS PROFIT 100,000

So in year two the closing stock of 100,000 would be carried forward as opening stock in year 2... but if the production cost per unit was to go to 15. Would I have to value the opening stock as either:

a) 10 x 10,000 = 100,000 like the closing stock from year one
or
b) 15 x 10,000 = 150,000 using the new production cost per unit (becuase I would have to value the closing stock using the 15)

Thanks for your help any replies and views would be much appreciated :)