Accounting 9706 · AS & A Level · Traditional costing methods
Traditional costing methods — practice question
W Limited operates one factory where it makes only one product. At present, marginal costing is used, although the directors have been thinking about changing to absorption costing.
(a)[2]
Identify two characteristics of absorption costing.
(b)[6]
Prepare an absorption costing statement to show the profit for September 2024.
(c)[2]
Explain why the profit for marginal costing is different from the profit for absorption costing.
(d)[6]
Calculate the total monthly profit if Option A is selected.
(e)[7]
Prepare a marginal costing statement to show the total monthly profit if Option B is chosen.
(f)[7]
Advise the directors which option they should choose. Support your choice by discussing both financial and non-financial factors.
Worked solution & mark scheme
This 30-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Charges both variable and fixed costs/all costs to each unit of production/no need to separate fixed and variable costs” …