sir why is that when sales>production, the profit under marginal costing is more than profit under absorption costing and vice-versa?
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marginal costing Vs. Absorption costing
6y ago#1With absorption costing fixed production overheads are included in the values of opening and closing inventory and therefore the amount charged in calculating the profit is the amount absorbed in the cost of the goods sold. With marginal costing fixed overheads are not included in the valuations of inventory and the total expenditure for the period is charged in calculating the profit.
This is all explained 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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