ACCA MA · Chapter 7 · Question 8 of 11
If there is no opening or closing inventory in a period, how does absorption costing profit compare with marginal costing profit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The profits are the same
Explanation
The two methods give different profits only because of the fixed production overhead carried in inventory. With no opening or closing inventory, all fixed production overheads are charged in the period under both methods, so the profits are the same.
More Absorption and marginal costing MCQs
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- Q11In a period, a company produced 10,000 units. Profit under absorption costing was $45,000 and profit under marginal costing was $51,000…
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- Q2Finished goods inventory increased by 500 units during a period. The fixed production overhead absorption rate is $8 per unit. How will…
- Q3A company's profit for a period under marginal costing was $62,000. Opening inventory was 1,200 units and closing inventory was 900 units…