CAF-5 · Chapter 9 · Question 1 of 10
What is the fundamental difference between marginal costing and absorption costing?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The treatment of fixed production overheads
Explanation
The core difference between the two costing methods lies in how they handle fixed production overheads. Absorption costing includes them in the product cost (and thus inventory), while marginal costing treats them strictly as a period cost.
More Marginal Costing and Absorption Costing MCQs
- Q3In an absorption costing income statement, how are variable selling and administration expenses accounted for?
- Q4When a company's production volume exceeds its sales volume during a specific period, how will the net profit compare between the two…
- Q5Which of the following components are included in the valuation of closing inventory under absorption costing?
- Q6A company had an opening inventory of 4,000 units and a closing inventory of 6,000 units. The fixed overhead absorption rate (OAR) is Rs…
- Q7In a marginal costing income statement, what is deducted from Sales Revenue to arrive at the "Contribution Margin"?