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Hello John,
I see in your notes the following:
“Answers to test in chapter 9
1 C
Month 1: Production > Sales; Absorption costing profit > Marginal costing profit
Month 2: Sales > Production; Marginal costing profit > absorption costing profit
A and C satisfy Month 1, C and D satisfy Month 2. Therefore C satisfies both.”Could you please explain this “Production > Sales; Absorption costing profit > Marginal costing profit”
Does it mean that If Production is higher than Sales then Absorption costing profit will be higher than Marginal costing profit?
I cannot find any explanation in your notes.
Thank you.
There is no point at all in using the notes on their own. They are Lecture Notes, and you need to use them while watching the lectures – it is in the lectures that we work through the examples and expand and explain.
If you are not watching the lectures then you must buy a Study Text from one of the ACCA approved publishers.
If production is higher than sales, then inventory will increase. If inventory increases then absorption costing will give a higher profit than marginal costing.
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