Hi John, when using marginal costing why did the change in variance not balance out like when doing absorption costing? When using marginal costing the sales volume variance changed by £6000 and the volume variance by £3000. Is the remaining £3000 because the closing inventory would be valued differently under marginal costing?
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Variance analysis lecture 5
5y ago#1Yes. With absorption costing the inventory valuation includes fixed overheads, whereas with marginal costing the inventory valuation is based only on the marginal/variable costs.
Thanks
5y ago#3You are welcome :-)
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