With reference to the information given above, complete the following: Mabotsana’s Limited’s absorption costing net income...

With reference to the information given above, complete the following: Mabotsana’s Limited’s absorption costing net income for October 2019 would be ______________ variable costing net income. (2)

a. R150 000 greater than

b. R150 000 less than

c. R240 000 less than

d. R240 000 greater than

The following information relates to questions 4 and 5: The following information was taken from the production records of Mabotsana Limited for October 2019: Opening inventory 1 000 units Closing inventory 6 000 units Direct labour cost per unit R40 Direct material cost per unit R20 Variable manufacturing overhead costs per unit R10 Fixed manufacturing overhead costs per unit R30 Variable selling and administrative costs per unit R6 Fixed selling and administrative costs per unit R14

Expert Solution

a. R150000 greater than

Under variable costing Inventory is valued taking only variable production cost.

But under absorption costing inventory is valued taking both variable and fixed production cost. So naturally value of inventory under absorption costing will be higher.

ekkarill92 answered 1 year ago

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