Accounting Multiple Choice Question – 19 March 2022

A manufacturer has an inventory at the end of the first year of operation.

What is the impact on profit if the manufacturer is considering using either marginal costing or absorption costing?

Select ONE answer:

1. The profit is the same if using either marginal costing or absorption costing.
2. The profit using absorption costing is higher because the inventory includes fixed overheads.
3. The profit using absorption costing is lower because all the fixed overheads are deducted.
4. The profit using absorption costing is lower because fixed overheads are under absorbed.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.