What is the key difference between Marginal Costing (Absorption Costing alternative) and Absorption Costing?

Explanation

Core Concept: Absorption costing includes fixed manufacturing overhead in product costs (inventory valuation), whereas variable/marginal costing treats fixed manufacturing overhead as a period expense. Context/Distractors: Both methods treat direct materials and direct labor as product costs. Selling overheads are always period costs under both systems. Exam Tip/Key Fact: When production exceeds sales, absorption costing reports higher net profit than marginal costing.