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A company using marginal costing in a period where production exactly equals sales will report a profit that is:
Correct Answer: C — Equal to the profit calculated under absorption costing
Explanation:
Correct Answer: C
Explanation:
When production equals sales, there is no change in inventory levels (opening inventory equals closing inventory). The difference between marginal costing profit and absorption costing profit arises solely from the fixed overheads carried in inventory. Since inventory levels do not change, the fixed overhead expensed under marginal costing equals the fixed overhead absorbed under absorption costing. Therefore, both methods produce the same profit figure.