أنشئ حسابًا أو سجّل الدخول للانضمام إلى مجتمعك المهني.
<p><em><strong>Does the operating income be equal in the two methods ؟ And why ?</strong></em></p>
The operating income will be the same only in one case when the production volume is exactly equal the sales volume.
It depends upon the level of closing Inventory. A higher closing inventory is the determining factor, and need not be equal.
Absorption for Full Costing is used for preparation of annual and periodic financial statements for external reporting.
Marginal or Variable Costing is used to assist management in making effective business decision. Marginal costing also helps in determining optimum product prices.
Operating profit under full costing will be higher if inventory level increased as compared to last year / period. Operating profit under variable costing will be higher if inventory level decreased during the year / period as compared to last year / period.
If there is no inventory balance at the end then no difference
So , end inventory will determine the difference
it depends on the relation between sales and production.
if production exceeds sales it means higher inventory and less COGS and as a result more income.
if sales exceeds production it means lower inventory and higher COGS and as a result low income.
