In Absorption costing fixed manufacturing costs are part of manufacturing cost......so , for valuation of Inventory it becomes part of cost...the more inventory , the more fixed manufacturing costs will be carried forward in subsequent period or in other words we can say fixed manufacturing cost is distributed among larger unit , present COGS will be less. So GP will increase, and in opposite situation GP will decreases and if there is no closing inventory, full cost will be part of present COGS...so fully charged during the period, not carried forward. No benefit.
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AMITABHA CHAUDHURI
Corporate Officer
MUMBAI MH
India
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Original Message:
Sent: 08-28-2021 02:37 PM
From: Isshika Chopra
Subject: Reason for the answer ?
As per absorption costing (gross margin) fixed cogs is taken as product cost so it will also increase if units sales are increased then why in the explaination it is written that it will have no effect