Go back to the data of Table 5.11. Cover up the answer in Table 5.12 and then attempt to write out the profit calculation under absorption costing. Add a note of narrative explanation to each line as a means of helping understanding by yourself and others.

Make sure that you understand the absorption costing approach fully.

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Table 5.11 Data for comparing absorption costing and marginal costing Produced Sold Held in stock at end of period Selling price per unit Variable cost per unit Fixed costs for each period Month 1 units 230 200 30 Month 2 units 270 210 90 Month 3 units 260 260 90 20 9 500 Month 4 units 240 280 50 Month 5 units 250 300 nil