03-15-2006, 06:20 AM
Prime cost = all direct costs
<b> AND</b>
When comparing profits of both marginal and absorption
the profit under both methods will be same if there is no change in closing stock level!!
and if there is a change-
if closing stock increases than opening stock then profit under absorption will be greater than marginal. and if closing stock decreases then profit will be higher using marginal costing!
MUBASHIR 'CAT'
<b> AND</b>
When comparing profits of both marginal and absorption
the profit under both methods will be same if there is no change in closing stock level!!
and if there is a change-
if closing stock increases than opening stock then profit under absorption will be greater than marginal. and if closing stock decreases then profit will be higher using marginal costing!
MUBASHIR 'CAT'
