When Solo compares their profits reported under absorption costing and marginal costing during a period when the level of inventory increased: Absorption costing profits will be higher and closing inventory valuations lower than those under marginal costing. Absorption costing profits will be higher and closing inventory valuations higher than those under marginal costing. Marginal costing profits will be higher and closing inventory valuations lower than those under absorption costing. Marginal costing profits will be higher and closing inventory valuations higher than those under absorption costing.
【参考答案及解析】
The correct answer is: • Absorption costing profits will be higher and closing inventory valuations higher than those under marginal costing. Closing inventory valuation under absorption costing will always be higher than under marginal costing because of the absorption of fixed overheads into closing inventory values. The profit under absorption costing will be greater because the fixed overhead being carried forward in closing inventory is greater than the fixed overhead being written off in opening inventory.
The correct answer is: • Absorption costing profits will be higher and closing inventory valuations higher than those under marginal costing. Closing inventory valuation under absorption costing will always be higher than under marginal costing because of the absorption of fixed overheads into closing inventory values. The profit under absorption costing will be greater because the fixed overhead being carried forward in closing inventory is greater than the fixed overhead being written off in opening inventory.