Which row correctly describes marginal costing vs absorption costing?OptionGives higher profits when inventory levels are increasingCharges overheads to expenses rather than productsAAbsorptionAbsorptionBAbsorptionMarginalCMarginalAbsorptionDMarginalMarginal

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SSC Financial and Cost Accounting P-1 QUESTION #6150

Question 1

Which row correctly describes marginal costing vs absorption costing?

Option	Gives higher profits when inventory levels are increasing	Charges overheads to expenses rather than products
A	Absorption	Absorption
B	Absorption	Marginal
C	Marginal	Absorption
D	Marginal	Marginal

Correct Answer Explanation

Option B is correct.

Higher profits when inventory rising → Absorption costing: Fixed overheads deferred in closing inventory, reducing the charge to profit.
Charges overheads as period costs → Marginal costing: All fixed overheads expensed in the period incurred.