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Can someone elaborate the statement below further??
‘The main disadvantage of marginal costing are that closing inventory is not valued in accordance with IAS 2 principles’
Thank you 🙂
For financial accounts, IAS 2 says that inventory should include all production costs (including fixed costs of production).
For management accounts, we do not have to follow rules, and if we choose to use marginal costing then fixed costs are not included in the valuation of inventory.
I do explain this in my free lectures on marginal and absorption costing. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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