CIMA Exam CIMAPRO19-P01-1 Topic 9 Question 92 Discussion

Actual exam question for CIMA's CIMAPRO19-P01-1 exam

Question #: 92
Topic #: 9

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?

A$1,050 lower

B$1,050 higher

C$2,450 lower

D$2,450 higher

Show Suggested Answer

Suggested Answer: D

by Latricia at Jul 10, 2024, 10:18 AM

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Arlette

2 months 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!

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Glory

2 days ago

User 3: That makes sense, let's double-check the numbers before making a final decision.

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Anglea

4 days ago

User 2: I think it's $2,450 higher if we value finished goods inventory at standard marginal cost.

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Claribel

1 months ago

User 1: Let's calculate the profit difference between standard absorption cost and standard marginal cost.

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Vallie

2 months 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.

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Vonda

10 days ago

I see your point, but I still think option C) $2,450 lower makes more sense in this scenario.

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Katheryn

15 days ago

I'm not so sure, I think it might actually be option D) $2,450 higher because of the fixed cost.

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Erinn

19 days ago

I think you might be right, option C) $2,450 lower does seem like the safer choice.

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Jamie

2 months 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.

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Kenny

4 days ago

User 3: Yes, that's correct. The profit would be $1,050 higher in month 6.

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Deonna

19 days ago

User 2: So, if the finished goods inventory was valued at standard marginal cost, the profit would be higher, right?

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Maybelle

20 days ago

User 1: I think you're right, the fixed cost per unit would make the standard absorption cost higher.

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Mignon

29 days ago

User 2: So, if the finished goods inventory was valued at standard marginal cost instead, the profit would be $1,050 higher, right?

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Basilia

1 months ago

User 1: I think you're right, the standard absorption cost would be higher because of the fixed cost per unit.

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Salome

2 months ago

But the absorption cost includes fixed overheads, so it would make the profit higher.

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Shawn

2 months ago

I disagree, I believe the profit would be lower in that case.

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Arlene

2 months 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.

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