Absorption costing values inventory at:
AVariable plus fixed production cost
BVariable cost only
CSelling price
DMarginal cost only
Answer & Solution
Correct answer: A. Variable plus fixed production cost
1. Absorption costing includes both variable and a share of fixed production cost in inventory value.
2. Marginal costing excludes fixed production cost from inventory.
3. Inventory under absorption is therefore higher by the absorbed fixed cost.
4. Hence absorption costing values inventory at variable plus fixed production cost.
_Source: ICAI BoS Inter Paper 3, Ch 14 "Marginal Costing", §14.11 ¶2_
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