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profits/losses using absorption and marginal costing

Former userFormer user6y ago

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John MoffatJohn MoffatTutor6y ago#1
The question does not require you to calculate the profits (which is not possible anyway because there is not information). Instead, it asks which of the answers is consistent with the data and that means which of the answers is possible. You will know from my free lectures that if inventories increase (because the produce more than the sell) as happens in month 1, then absorption costing will give the higher profit. If inventories decrease (because they sell more than they produce) which happens in month 2, then marginal will give the higher profit. Only one of the available choices agrees with that :-)
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