Asked by
Aleksandra Bucko
on Nov 17, 2024
Verified
For a period during which the quantity of product manufactured exceeds the quantity sold, operating income reported under absorption costing will be smaller than operating income reported under variable costing.
Absorption Costing
An accounting method that includes all of the costs associated with manufacturing a product in the cost of that product.
Operating Income
Earnings before interest and taxes (EBIT), a measure of a company's profitability from its operations.
Variable Costing
An accounting method that assigns only variable production costs to products, treating fixed costs as period costs.
- Discern the discrepancies between absorption costing and variable costing and their outcomes on the profitability of operations.
- Understand the impact of production volume on operating profit using both costing approaches.
Verified Answer
RS
Learning Objectives
- Discern the discrepancies between absorption costing and variable costing and their outcomes on the profitability of operations.
- Understand the impact of production volume on operating profit using both costing approaches.
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