If absorption costing principles were applied, the profit for the period compared to the marginal costing profit would be which of the following?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
HMF Co produces a single product. The budgeted fixed production
$500,000. The budgeted output for the period is 2,500 units. Opening inventory at the start of the
period consisted of 900 units and closing inventory at the end of the period consisted of 300 units. If
absorption costing principles were applied, the profit for the period compared to the marginal costing
profit would be which of the following?
A $125,000 higher
B $125,000 lower
C $120,000 higher
D $120,000 lower
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