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I didn’t understand why Answer c is correct in Chapter 9 test Question 1. Please help me i am stuck here.
When Production > Sales, Absorption costing gives a higher profit;
When Production < Sales, Marginal costing gives a higher profit;
When Production = Sales, both methods give the same profit.
Barbara is correct.
There is not enough information to be able to check the actual figures, but answer C is the only one that satisfies the rules that Barbara has re-typed.
(The question is careful not to ask which of the profits are correct, it just asks which of them are consistent i.e. which of them are possible.)
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