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Difference between Marginal cost and absorption cost

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Added on 2023/01/09

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AI Summary

The main difference between marginal cost (MC) and absorption cost (AC) is that MC relates only to inventory cost, while AC relates to the cost incurred in the whole production. MC considers only fixed costs for inventory valuation, while AC considers both fixed and variable costs. MC is suitable for short-term decision making, while AC is viable for long-term decision making. MC leads to higher profitability, while AC leads to lower profitability.

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Difference between Marginal cost and absorption cost

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