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inventory valuation will always be lower using marginal costing than absorption costing.
is this true sir ??need help here
Yes, assuming that there are fixed production overheads which is normally the case. If there are no fixed production overheads then the inventory valuation will be the same for both methods of costing.
in the question, it is said that always!
and I don’t think it’s true
because there might not be fixed cost in some scenario
so it might equal absorption costing in this scenario…. as u told earlier…I am afraid of the word ALWAYS!
and one more thing
in the same question, it was given that marginal costing profit will always be higher
and the answer is given false here
it means both of the questions must be false right??
if one is false then so is another……
I’m so confused of this unclear question so i hope some help from your side
thank u in advanceIt is safe to assume in the exam that there will always be fixed production costs.
If inventory increases over the period then absorption profit will be higher. If inventory decreases over the period then the marginal profit will be higher.
Have you watched my free lectures on this because I illustrate how and why the profit is affected by inventory increasing or decreasing?
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