CIMA BA2 – The Management Accountant’s Profit Statement – Marginal Costing

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1. asharma198627 says

   April 2, 2020 at 12:30 pm

   Hi there, thank you for explaining it so well 🙂

   Could you please confirm- When calculating profit by Marginal costing, we will take into account Only the change in inventory unlike Absorption costing wherein inventory was considered in both the months i.e Jan and Feb?

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   • bb1234 says

     April 17, 2020 at 5:03 pm

     Hello,

     Not a lecturer, but think I can help.

     In both marginal and absorption costing, opening and closing inventories are present. The only difference is that absorption inventory values are higher by the fixed production overhead which is included.

     Therefore, the change in inventory is only considered when reconciling the two. To calculate the fixed overheads included in inventory (the difference between the profits of the two methods) you find the number of units change (instead of calculating seperately for opening and closing inventory) and multiply it by the overheads per unit.

     Hope that helps, and sorry if it was a bit rambly.

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