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.
We also offer one-on-one tutorials via Skype at reasonable rates.
Connect with us:
Connect with us:
Email: [e-mail]
Our Website: Counttuts.com
Our Facebook Page: / counttuts
Support our Efforts: / counttuts

[@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.

[@tonykiprop5802]

Thank you Counttuts for the explainer videos. You really help us to be more efficient instead of searching all over for such good content. You are making a difference, Appreciated!

[@maryamadekunle6732]

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

[@karabobusang1942]

You are Simply Amazing, you are literally my Lecturer for Management Accounting hey 🤞🏽❤️❤️.
Please continue doing such amazing work 🙏🏻

[@marcleven8477]

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

[@ambrosemutai5463]

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

[@daia8404]

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

[@darkknight6574]

Can't believe how much helpful this video is.
Thank-you so much!

[@davidgarvin2281]

Thank you for explaining this topic thoroughly, you have been very helpful.

[@ShaggyGriff96]

thank you for taking the time to do this, my understanding is now much clearer :)

[@alexwhelan981]

Thank you very much. Very informative and helped me prepare for an interview. Keep up the good work!

[@ajithkumarrj8545]

After searching lots of classes Finally I found ur channel for this topic . Amazing explain all the concepts.tq soo much sir ❤️

[@hasvinvictor7146]

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

[@madalitsombewe9948]

Love your teaching (simply simple and clear )

[@aphiwembande8661]

Haven't even watched this but I've already liked cause I know I know it will be fire

[@wilkajohannes1003]

You are a life saver sir. Please continue doing this.

[@mariaindilileinge8761]

I really had a block mind on this but cleared , thank you very much sir keep uploading such topics.

[@esaubanda]

Immensely elated! This is incredible! I appreciate. You deserve my utmost attention. Keep it up. More blessings on you, great work, awesome!! Thanks

[@boitumelomokotong4861]

This was very informative. I enjoyed it and it has helped me tremendously👏🔥. God bless you.

[@fredrick_mwaura]

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

[@jiyaa8462]

Thank you so much, you're literally a life saver, having my finals tmrw, this really helped!

[@sharnyn7322]

I cannot thank you enough for this video!!!

[@MultiSinovuyo]

Thank you for this video, made such a big difference

[@charitytheko8116]

Wow... everything makes sense now..Thank you counttut 😁

[@MrsObiako]

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

[@katrinaaliviza457]

I had a really hard time understanding this concept. I've watched a lot of videos read a lot and still nothing. But earlier today my friend shared this link. I'm so excited I can answer a question blindfolded 😂. Thank you so much for amaizing work sir.

[@Counttuts]

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

[@luckyboyprins8456]

lectures give us hard times of learning , i thank god i found you sir
🎉🎊

[@shantelhalley6976]

Always dislike this topic but u made it simple... great job

[@lovehurtswhenattached92]

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

[@straightouttamatrix]

This was more than i was looking for and in a best way possible. Really appreciate the effort SIR. Thanks alot🙏🏻

[@chandajere9586]

This is very clear and concise.Thank you so much

[@louisebowa6032]

This was really helpful, thank you very much🙏🏾

[@tatisammy9169]

How did you teach me 2 2hr classes in 32 mins thank you

[@symplytomi5178]

God bless you,you are a great lecturer!!!!

[@ropafadzochivizhe4561]

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

[@muigaisarah5342]

u've saved lots of students , thanks a lot

[@Counttuts]

You are welcome. Thank you for the kind feedback.

[@JanetMong]

Thankyou so much! Well explained

[@deepakkrishnakb]

Simple and nice explanation,thanks alot

[@RsWePVM]

Thank you sir, crisp and clear. Much better than how my teacher in college is doing.

[@Counttuts]

Thank you for the kind feedback.

[@danisabaloyi608]

Thank You, your work is amazing

[@baloonram4959]

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

[@katienelson8163]

thank you so much! this really helped me

[@ThomasSheriff21Chindende]

the best ever explanations

[@becomingCA-SA]

you definitely got a subscriber by the wat you explained this 💯

[@ryan4314]

u saved my life thank you

[@ronaharnischleinitz6335]

Thanks alot, was much of help.

[@tiff8831]

This was very helpful. Thanks sir

[@nonkululekohlatshwayo8164]

Sir. You are simply the best

[@biandaful]

Well explained!!!!

[@neonmuzik8979]

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

[@mohamedfaisal4123]

Top notch explanation.

[@RealHesk]

Thanks alot for your service. You've helped me

[@sophielalalification]

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

[@bethafek6170]

Hello, what about if you bought plant and machinery, do you add it on the absorption costing?

[@aduratomibabalola9884]

Amazing lecture. cheers.

[@praisemutoko3175]

Thank you soo much, that was worthwhile. Now i am confident that i understand

[@Counttuts]

You are welcome :)

[@Dan-vk7jc]

Thanks so much assisted me so much!

[@yerroa.jallow4452]

thank you for the video, its really helpful.

[@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!

[@alenigodwin560]

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

[@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.

[@lisanaindjala2278]

Thank you so much sir for teaching me this😭I’m truly grateful and you are a great lecturer!

[@patricklikalamu8264]

this is very helpful

[@sbohmdu2557]

it helps a lot, thanks.

[@chiposvubure7150]

Thank you so much 🤝 Your are a good lecturer

[@chiposvubure7150]

I am looking for more videos for MAC2601 i can't find them 😢

[@karenagyeman6847]

Please what will I do if there is a variable selling,distribution and administration costs of about 20% of the sales value

[@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.

[@mbasalamla7533]

wow 🙌🙌🙌 thank you Mr for you help
now I understand clearly

[@kudsiamow3441]

Thanks a lot for explaining in details! ♥

[@fahimjalal2703]

Thx for making the vid 😊

[@patrickugwuegbu6119]

Very informative

[@musondamulenga9306]

thanks a lot ,great explanation!

[@Counttuts]

You are welcome, and thank you Musonda.

[@mulisamulovhedzi262]

Best explanatory video 🥂

[@paysonobi6548]

I enjoyed your teaching

[@sinazopreciousmtana370]

@counttuts, do you use the predetermined / actual fixed overhead cost as a period cost in marginal costing?
I love your explanation sir👌

[@mikanyay]

Thank you 😊

[@Ruth-Mocheche]

nice lecture. big ups

[@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.

[@user-oe8qi8xy4x]

hey sir, why under/over absorbed overhead only included fixed production cost ,how about the variable production cost

[@boineelomasupe740]

Thank you❤❤❤❤❤

[@thembekilegwala3465]

Thank you. you are amazing

[@danielokere3624]

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

[@smartmgbachi9173]

if i dont comment i must be selfish. thank you so much for breaking down this topic. God bless you

[@Counttuts]

Thank you :) Blessings

[@userxp7055]

What if sales in units is given along with production in units ? How do we find inventories?

[@braynotieno9564]

Good work 👏 🙌 👍

[@khalifahmedmohamed7204]

Thanks ☺️☺️☺️

[@benmuhizi1975]

Sir, Thank you.

[@Lalaundercover389]

can i use this for cima

[@xz1nc824]

thnx a lot

[@izzyokafor8888]

Keep up the good work watching from Nigeria. Can we also suggest topics for you to teach?

[@lucianakale1132]

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

[@paysonobi6548]

Please I need to ask some questions base on absorption and marginal costing...
Been trying to do some calculations on it... But it was difficult...

[@numaniqbal2261]

Thankyou

[@rohanjaved1886]

Thank you thank you thank youuu

[@0dawisdom478]

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

[@sowdaayaan1843]

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

[@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?.

[@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