- This topic has 1 reply, 2 voices, and was last updated 1 year ago by .
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.
ACCA December 2022 Exam results:
* Pass rates * Comments * Instant Poll * Competition *
Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Methods
In the absorption costing we include all the costs including variable and fixed costs in the production costs like this:
Sales
less: costs
Direct material
Direct labour
Variable overheads
Fixed overheads
Total production cost
Profit
In the marginal costing we include all the marginal costs in the production costs but not fixed costs like this.
Sales
less: costs
Direct material
Direct labour
Variable overheads
Total production cost
Fixed overheads
Profit
In both methods, fixed costs are included but the point is that whether we should include them in the production costs or not. But what is the point of these methods because the fixed costs are deducted anyways?
It changes the way that the inventories are valued.
I do explain the reasons for some businesses choosing to use absorption costing and others choosing to use marginal costing in my free lectures 🙂