Economics · Absorption vs Marginal Costing
Which specific condition must be satisfied for the Marginal Costing approach to yield a lower net profit compared to the Absorption Costing approach in a given accounting period?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1When the variable production cost increases significantly during the period.
- 2When the opening stock inventory level is higher than the closing stock inventory level.
- 3When the closing stock inventory level is higher than the opening stock inventory level.✓
- 4When the quantity of units produced is exactly equal to the quantity of units sold.
Correct answer
When the closing stock inventory level is higher than the opening stock inventory level.
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