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John Moffat.
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zaramujeeb
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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.
John Moffat
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You 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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