Economics · Cost Accounting
Which of the following statements correctly distinguishes between marginal and absorption costing?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1In marginal costing, the cost of a product represents the additional cost of producing an extra unit.✓
- 2Absorption costing profit is always higher than marginal costing profit, regardless of inventory levels.
- 3Marginal costing is generally used for external financial reporting, while absorption costing is used only for internal decision-making.
- 4In marginal costing, the cost of a product includes an allowance for fixed production costs.
Correct answer
In marginal costing, the cost of a product represents the additional cost of producing an extra unit.
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