8. Absorption and marginal costing Flashcards
1
Q
What is the main difference between absorption and marginal costing?
A
The treatment of fixed production overheads
Marginal costing does not consider these - absorption costing does.
2
Q
What is contribution? What is the formula for this?
A
Contribution = sales price - all variable costs
3
Q
Marginal cost:
cost card
A
Direct materials X
Direct labour X
Variable prod. overheads X
Cost per unit X
4
Q
Absorption cost: cost card
A
Direct materials X
Direct labour X
Variable prod. overheads X
Fixed prod. overheads X
Cost per unit X
5
Q
If inventory is…. what is the effect on AC and MC profits
a) constant
b) increasing
c) decreasing
A
a) ACP = MCP
b) ACP > MCP
c) ACP < MCP
