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Under Marginal Costing vs Absorption Costing principles in managerial accounting, why does net profit under absorption costing exceed net profit under marginal costing when production volume exceeds sales volume?

Absorption costing defers a portion of fixed manufacturing overheads in ending inventory balances Absorption costing expenses all fixed manufacturing overheads immediately in full Marginal costing includes administrative overheads in product cost Marginal costing overvalues closing inventory

Correct Answer:

Absorption costing defers a portion of fixed manufacturing overheads in ending inventory balances

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