• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA Books

Books for Sept'23 ACCA exams : Get your discount code >>

New! Ask ACCA AI Tutor

Post your questions
& get instant answers

Marginal costing vs Absorption costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Marginal costing vs Absorption costing

  • This topic has 1 reply, 2 voices, and was last updated 2 months ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • July 18, 2023 at 6:25 pm #688525
    Liih
    Participant
    • Topics: 3
    • Replies: 3
    • ☆

    When comparing the profits reported under marginal and absorption costing when the levels of inventories decreased (assuming unit variable and fixed costs are constant)
    A absorption costing profits will be lower and closing inventory valuations higher than those under marginal costing
    B absorption costing profits will be lower and closing inventory valuations lower than those under marginal costing
    C absorption costing profits will be higher and closing inventory valuations lower than those under marginal costing
    D absorption costing profits will be higher and closing inventory valuations higher than those
    under marginal costing

    Correct answer(s):
    A absorption costing profits will be lower and closing inventory valuations higher than those under marginal costing
    Closing inventory valuations are always higher with absorption costing because of the inclusions of fixed overhead. Therefore, the statements that closing inventory valuations are lower are incorrect. If inventories decrease, absorption costing profits are lower because of the fixed overhead being released from inventory

    I think B correct. Decrease Inventory –> closing < opening –> absorption costing<marginal

    July 19, 2023 at 7:33 am #688558
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53169
    • ☆☆☆☆☆

    A is correct.

    I do illustrate (and explain why) in my free lectures on absorption and marginal costing, that if inventories increase then absorption costing gives the higher profit, whereas if inventories decrease then marginal costing gives the higher profit.

    (With absorption costing, both the opening and closing inventories will be higher than in marginal costing.)

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA Qualification syllabus changes for 2023/24

Need verifiable CPD for 2023? 21 units of FREE CPD on offer from ACCA

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

PQ Magazine

Latest comments

  • fruitella on Discounting, Annuities, Perpetuities – ACCA Management Accounting (MA)
  • ukpabi on Marketing – ACCA Strategic Business Leader (SBL)
  • nghja2012 on Inventory – Examples – ACCA Financial Reporting (FR)
  • kelems on Basic group structures – SPLOCI introduction and example – ACCA (SBR) lectures
  • jcosgrove16 on Double Entry Bookkeeping (part a) – ACCA Financial Accounting (FA) lectures

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in