CAF-5 · Chapter 9 · Question 10 of 10
When comparing absorption costing with marginal costing, under which specific condition will the net profit reported by both methods be exactly the same?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) When there is no opening or closing inventory (Production volume equals Sales volume).
Explanation
If a company sells exactly what it produces in a period, inventory levels do not change. Consequently, all fixed production overheads incurred in that period are charged to the income statement in both methods, resulting in identical net profits.
More Marginal Costing and Absorption Costing MCQs
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