Absorption Costing vs Marginal Costing | Explained with Example

In this lesson, we look at both absorption costing and marginal costing. We explain what absorption costing is, what marginal costing is, and go through a thorough example on how to calculate net profit using both the absorption costing and marginal costing.
In looking at absorption costing, we explain and go through some examples on over and under absorption of fixed production overheads.
We also look at arguments in favor of both absorption costing and marginal costing.
Check out other straight-forward examples on our channel.
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[@yaseenali5842]

Your work is better then any youtuber, you are better then my class teacher, keep uploading such topics
Very grateful to know about about this channel

[@Counttuts]

Thank you for the kind comment Yaseen :).

[@georgephilip1966]

@@Counttuts For over and under absorption, why didn't we consider the variable cost of r 35?

[@boitumelobonginkosikunene3547]

A whole semester struggle cleared in 32 minutes🤯...your videos always blow my mind...and still, I don't expect anything less everytime I come back for more💯👍. Thank you, you've really helped me.

[@kijeannie4317]

This really helped me understand marginal and absorption costing.... I had a mental block for years until now. Wonderfully explained .... such clarity.

[@ambrosemutai5463]

This is one of the best explanations for costing and has helped me understand absorption and marginal costing so well

[@marcleven8477]

very well explained you are doing a better job than my uni lecturers thanks a lot keep up the good work!

[@muigaisarah5342]

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[@Counttuts]

You are welcome. Thank you for the kind feedback.

[@daia8404]

Thank you so much!!! I understand this more than I ever did in college

[@maryamadekunle6732]

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I am a tutor and I can say I understand it way better.
Thank you for breaking this in the best possible way.

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[@Counttuts]

Hello Katrina, glad that it helped. Thanks for the kind feedback.

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[@Counttuts]

Thank you for the kind feedback.

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[@chiposvubure7150]

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[@MrsObiako]

Thank you Sir... I have truly understood this, especially how to treat over/under absorption cost...

[@sharnyn7322]

I cannot thank you enough for this video!!!

[@hasvinvictor7146]

Best video to watch on absorption and marginal costing!!! Thank you so much @counttuts

[@ThomasSheriff21Chindende]

the best ever explanations

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Thankyou so much! Well explained

[@chandajere9586]

This is very clear and concise.Thank you so much

[@barbaraedith4111]

You are such a wonderful Teacher/tutor. You are a star. I understand a lot from your video better than reading any book. Excellent.
Do you have any other accounting videos? please upload more.

[@Counttuts]

Thank you Barbara, you can visit our channel for all accounting videos, and more to come.

[@sophielalalification]

Simple, clear and straight to the point! Thank you!

[@fredrick_mwaura]

This is very well articulated. Keep up the good job.

[@tiff8831]

This was very helpful. Thanks sir

[@ryan4314]

u saved my life thank you

[@becomingCA-SA]

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[@straightouttamatrix]

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[@katienelson8163]

thank you so much! this really helped me

[@MultiSinovuyo]

Thank you for this video, made such a big difference

[@mohamedfaisal4123]

Top notch explanation.

[@biandaful]

Well explained!!!!

[@walterbigblue]

You stated that over absorption of overheads is deducted from the P&L and under absorption is added to the P&L. My understanding is that it should be the other way around. Under absorption of overheads are deducted from the P&L while over absorptions are added thus increasing gross profit.

[@Counttuts]

That would be incorrect actually. Follow our explanation in the lesson again to understand.

[@ronaharnischleinitz6335]

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[@praisemutoko3175]

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[@Counttuts]

You are welcome :)

[@baloonram4959]

That was a very good explanation, now i am ready for exams, thank you sir :D

[@ropafadzochivizhe4561]

Thank u for the presentation it really helped me especially absorption costing

[@smartmgbachi9173]

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[@Counttuts]

Thank you :) Blessings

[@alenigodwin560]

U explained well brother thank you i wish we would get more examples with opening inventory

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Thanks highly appreciated explanations on point and format easy for anyone to understand 👍 😀

[@Dan-vk7jc]

Thanks so much assisted me so much!

[@musondamulenga9306]

thanks a lot ,great explanation!

[@Counttuts]

You are welcome, and thank you Musonda.

[@patricklikalamu8264]

this is very helpful

[@louisebowa6032]

This was really helpful, thank you very much🙏🏾

[@kudsiamow3441]

Thanks a lot for explaining in details! ♥

[@Ruth-Mocheche]

nice lecture. big ups

[@neonmuzik8979]

thanks sir, I think this made up my preparation of an exam I ama bout have! thx again

[@huisinyii4353]

i was wondering why when there is higher closing stock = profit will be higher when using absorption costing, and your example easily let me understand how it works. Thank you!

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[@RealHesk]

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[@akankshathooti]

Thanks sir grt explanation

[@Counttuts]

Thank you. You are welcome.

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I enjoyed your teaching

[@Anele_Gcabashe]

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now I understand clearly

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Thank You, your work is amazing

[@lucianakale1132]

Woow…….I don’t know how to thank you, I was wondering how am gonna face my exams next week

[@mulisamulovhedzi262]

Best explanatory video 🥂

[@mikanyay]

Thank you 😊

[@0dawisdom478]

Under and over absorbed use to confuse me, now im fine thnx

[@ntcuong01ct1]

Dear Friends,
I have a question:
I want to setup Absorption costing of a product in year 2020. Next, I want to compare actual costing and Absorption costing in this product by month, year. How do I setup?.

[@aduratomibabalola9884]

Amazing lecture. cheers.

[@danielokere3624]

Please sir how do u know when to apply the absorbed overhead formula I'm a bit confused 😔

[@chaly839]

Good lecture thank you so much. there is no problem with the way you have treated over/under absorption, my issue is on the part where you said when there is an increase in opening or closing inventory then the creation of overe/under absorption, my thinking is instead of increase in opening and closing let it be the difference between the budgeted production and the actual production.

[@boineelomasupe740]

Thank you❤❤❤❤❤

[@patrickugwuegbu6119]

Very informative

[@aliakim1934]

May you please upload target costing and life cycle costing

[@nokwandanoks1559]

Good day can i ask why you not bringing forward the closing. Inventory to the next production of 7000 units meaning the 41000 must be the opening for the production of 7000 units than closing Inventory will be 41000

[@braynotieno9564]

Good work 👏 🙌 👍

[@EnertMakwale]

I thought under absorption is like an expense so we subtract it from the gross profit and the over absorption is an asset we add it to the gross profit

[@sbohmdu2557]

it helps a lot, thanks.

[@thembekilegwala3465]

Thank you. you are amazing

[@khalifahmedmohamed7204]

Thanks ☺️☺️☺️

[@DaiGua]

Sir, could I know why the closing inventory in absorption costing, production of 6000&7000units is zero? It shouldn’t have 1000units? Why

[@adaeze_]

It is not zero
Pay attention to the video again

[@serakwe718]

Haiii chief you are the best iyoooo I need for of ur help boss ,

[@xz1nc824]

thnx a lot

[@numaniqbal2261]

Thankyou

[@fahimjalal2703]

Thx for making the vid 😊

[@user-zn4pw8xz6v]

There should be opening inventory for the last period, no?

[@benmuhizi1975]

Sir, Thank you.

[@gibsonmweene8898]

now show us how you do the profit reconciliation for the two methods

[@sowdaayaan1843]

The closing inventory for production of 6000 should it not be the opening inventory for the next production that 7000 units?