The correct answer is: A. a-3, b-4, c-1, d-2
Variable costing is a method of accounting that assigns only variable costs to inventory and cost of goods sold. Fixed costs are expensed in the period in which they are incurred.
Absorption costing is a method of accounting that assigns all costs, both variable and fixed, to inventory and cost of goods sold.
Valuation of stock is higher under absorption costing than under variable costing because fixed costs are included in the cost of inventory under absorption costing.
Marginal and differential costs are the same because they are both the difference between the costs of two alternatives.
No change in fixed cost occurs under either variable costing or absorption costing because fixed costs are not affected by changes in production or sales volume.
Here is a more detailed explanation of each option:
a. Variable costing: Variable costing is a method of accounting that assigns only variable costs to inventory and cost of goods sold. Variable costs are those costs that vary directly with the level of production, such as direct materials and direct labor. Fixed costs are those costs that do not vary with the level of production, such as rent and depreciation. Under variable costing, variable costs are assigned to inventory and cost of goods sold, and fixed costs are expensed in the period in which they are incurred.
b. Valuation of stock is higher: Under absorption costing, all costs, both variable and fixed, are assigned to inventory and cost of goods sold. This means that the valuation of stock is higher under absorption costing than under variable costing.
c. Marginal and differential costs are same: Marginal costs are the additional costs incurred when one unit of output is produced. Differential costs are the difference in costs between two alternatives. Marginal and differential costs are the same because they are both the difference between the costs of two alternatives.
d. Marginal costing: Marginal costing is a method of accounting that focuses on the costs that change with the level of production. Under marginal costing, only variable costs are assigned to inventory and cost of goods sold, and fixed costs are expensed in the period in which they are incurred.
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