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A company manufactures a single product. The cost card for a unit of this product is as follows:
During month 6, finished goods inventory increased by 350 units.
By how much would the profit differ in month 6 if finished goods inventory was valued at standard marginal cost rather than standard absorption cost?
Suggested Answer: D
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42 comments · newest first
FR
Frederica
11 months ago
Standard absorption cost can really mess with profit figures!
CL
Cletus
11 months ago
I think it’s actually $2,450 lower, right?
JE
Jeanice
11 months ago
Wait, why would it be lower? Sounds off.
DO
Dong
12 months ago
Totally agree, that makes sense!
AN
An
12 months ago
Profit would be $1,050 lower with marginal cost.
MI
Mila
1 year ago
I feel a bit confused about the numbers. I remember the concept, but I can't quite remember how to apply it to this specific situation.
LU
Luis
1 year ago
If I recall correctly, when finished goods inventory increases, the profit under absorption costing is usually higher because of the fixed costs being spread out. So maybe it's option B?
AD
Adela
1 year ago
I think I practiced a similar question where we had to calculate the difference in profit based on inventory valuation methods. I might be leaning towards option A or C.
MA
Maile
1 year ago
I remember something about how absorption costing includes fixed manufacturing overhead in inventory, but I'm not sure how that affects profit when inventory increases.
RO
Roselle
1 year ago
No problem, I've got this. Inventory valuation is one of my strengths. I'll breeze through this and get the right answer.
VI
Viola
1 year ago
Ugh, I hate these inventory questions. There are so many moving parts to keep track of. I'll have to work through this slowly and double-check my work.
ST
Stephaine
1 year ago
Okay, I think I've got this. I just need to plug the numbers into the right formulas and compare the results. Shouldn't be too tricky.
WI
Winfred
1 year ago
Hmm, I'm a bit confused by the cost card information. I'll need to carefully review the fixed and variable costs to determine the appropriate valuation method.
KI
Kirby
1 year ago
This looks like a straightforward question on inventory valuation. I'll need to calculate the difference in profit using standard marginal cost versus standard absorption cost.
LI
Lisbeth
1 year ago
Hmm, this seems like a tricky one. I'm thinking Log Analytics might be the way to go since it can provide detailed logs and diagnostics to help identify the root cause of the error.
RU
Rutha
1 year ago
I'm a bit unsure, but I feel like the exam questions I practiced did mention options for selecting software versions.
ED
Edna
1 year ago
Okay, I've got this. The key is understanding how the Message Waiting Indicator light works in a SIP integration between Cisco UCM and Cisco Unity Connection. The administrator needs to configure the Unsolicited NOTIFY message type in the SIP Trunk Security Profile to make that work. Easy peasy!
NA
Narcisa
1 year ago
Response fading also comes to mind, but I thought that was more about reducing prompts than approximations. I guess I'm unsure!
BE
Bettyann
1 year ago
Okay, let's break this down. The retailer wants to partner with suppliers on inventory replenishment and sales forecasting. That suggests they're looking for a technology that facilitates collaboration and data-sharing between the retailer and suppliers. Of the options given, Collaborative planning, forecasting, and replenishment (CPFR) seems to be the most relevant.
AR
Arlette
1 year ago
Ah, the old standard absorption cost vs. standard marginal cost conundrum. I'm going to need to break out my trusty calculator for this one. Hopefully, I don't end up like the proverbial 'deer in the headlights' on this one!
GL
Glory
1 year ago
User 3: That makes sense, let's double-check the numbers before making a final decision.
AN
Anglea
1 year ago
User 2: I think it's $2,450 higher if we value finished goods inventory at standard marginal cost.
CL
Claribel
1 year ago
User 1: Let's calculate the profit difference between standard absorption cost and standard marginal cost.
VA
Vallie
1 year ago
Haha, this question is like a trick question! They're trying to catch us out with that fixed cost. I'm going to go with option C) $2,450 lower, just to be on the safe side.
VO
Vonda
1 year ago
I see your point, but I still think option C) $2,450 lower makes more sense in this scenario.
KA
Katheryn
1 year ago
I'm not so sure, I think it might actually be option D) $2,450 higher because of the fixed cost.
ER
Erinn
1 year ago
I think you might be right, option C) $2,450 lower does seem like the safer choice.
JA
Jamie
2 years ago
Hmm, I'm not so sure about this one. The cost card shows a fixed cost of $50 per unit, so wouldn't the standard absorption cost be higher than the standard marginal cost? I might have to double-check my calculations on this one.
CE
Celeste
1 year ago
Deonna: Thanks for clarifying that. It makes sense now.
KE
Kenny
1 year ago
User 3: Yes, that's correct. The profit would be $1,050 higher in month 6.
DE
Deonna
1 year ago
User 2: So, if the finished goods inventory was valued at standard marginal cost, the profit would be higher, right?
MA
Maybelle
1 year ago
User 1: I think you're right, the fixed cost per unit would make the standard absorption cost higher.
MI
Mignon
1 year ago
User 2: So, if the finished goods inventory was valued at standard marginal cost instead, the profit would be $1,050 higher, right?
BA
Basilia
1 year ago
User 1: I think you're right, the standard absorption cost would be higher because of the fixed cost per unit.
SA
Salome
2 years ago
But the absorption cost includes fixed overheads, so it would make the profit higher.
SH
Shawn
2 years ago
I disagree, I believe the profit would be lower in that case.
AR
Arlene
2 years ago
This seems straightforward - the question is asking about the difference in profit if the inventory is valued at standard marginal cost instead of standard absorption cost. I think the answer is B) $1,050 higher.
CA
Carrol
1 year ago
That makes sense. Thanks for explaining.
CE
Cecilia
1 year ago
Because the finished goods inventory increased by 350 units, so the profit would be higher if valued at standard marginal cost.
LE
Leonora
1 year ago
Why do you think it would be higher?
WE
Wenona
1 year ago
I think the answer is B) $1,050 higher.
SA
Salome
2 years ago
I think the profit would be higher if finished goods inventory was valued at standard marginal cost.