|
|
|
|
New Member
|
|
Mar 28, 2016, 08:54 AM
|
|
Reconciling Profit Between Periods (Absorption Costing)
Hi All,
I am bit confused between the reconciliation of the profit between the periods.
Please see link below:
https://books.google.com.hk/books?id...osting&f=false
Why do we deduct both under and over absorption, can anyone give further details?
Thanks
|
|
|
Ultra Member
|
|
Mar 29, 2016, 09:13 PM
|
|
Unalbe to veiw your attachment, under or over absorption is an accounting exercise, whereas calculation of profit is a time based exercise which must not be distrorted by the costing system used
|
|
|
New Member
|
|
Mar 30, 2016, 04:34 AM
|
|
Attachment 48276
Please see attached file - bit confused with the explanation.
|
|
|
Ultra Member
|
|
Mar 30, 2016, 03:04 PM
|
|
Still unable to view attachment. Under and or over absorption must be charged to the P/L in order to accurately determine profit for a period, you cannot carry this forward to another period as it has no realisable value
|
|
|
New Member
|
|
Mar 31, 2016, 04:51 AM
|
|
For absorption costing, major part of profit difference is due to sale volume and adjustments for under/over absorption in each of the 2 periods.
Comparing the profit from Month 1 to Month 2:
- decrease in sales volume in month 2 will reduce the profit
- over-absorption in June deducted
- under-absorption in July deducted
**The over absorption for June made profit higher that month, so it was deducted.
I am a bit confused with why both absorption is deducted.
|
|
|
Ultra Member
|
|
Mar 31, 2016, 10:27 PM
|
|
I think you are dealing with terminology and a question of whether we are crossing a balance date. Over absorption means the cost of sales has been overstated and therefore adjustment should be made. Under absorption means the cost of sales has been understated and therefore adjustment must be made
|
|
Question Tools |
Search this Question |
|
|
Add your answer here.
Check out some similar questions!
Marginal costing and absorption profit?
[ 0 Answers ]
The following budgeted information relates to a manufacturing company for next period:
Unit $
Production 14,000 Fixed production costs 63,000
Sales 12,000 Fixed selling costs ...
Calculating profit using absorption costing
[ 3 Answers ]
Here is the question I am having trouble with:
When opening stock were 8500 litres and closing stock 6750 litres, a company had a profit of $60,100 using marginal costing. Assuming that the fixed overhead absorption rate was three dollars per litre, what would be the profit using absorption...
Absorption costing profit from Marginal costing profit
[ 0 Answers ]
I know my opening stock and closing stock figures and I have worked out my annual profit using marginal costing. I also know my fixed overhead absorption rate.
Using these figures, what formula do I use to calculate my profit using absorption costing?
View more questions
Search
|