The following statements set out to explain why the profit for a period calculated under marginal costing may be greater than the profit calculated under absorption costing. Are they true or false?
1.Fixed production overhead is over-absorbed
2.Sales volume is less than production volume
Statement 1 is false because fpoh has no relation to marginal costing, 2nd statement is also false because if sales volume is less than production then in either costing profit will decrease.
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Marginal costing
4y ago#1You have not said what question you are asking :-)
If sales are less than production then inventories will increase, and therefore the absorption profit will be greater than the marginal profit.
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