Asked by Riski Prasetyo Putro on Apr 27, 2024
Verified
Absorption costing makes it difficult for financial statement users to interpret year-to-year changes in reported income when inventory levels change between one year and the next.
Inventory Levels
The quantity of goods and materials on hand available for sale or used in production at any given time within a business.
- Comprehend the variances between assorted costing techniques (absorption, variable) and how they influence financial disclosures.
Verified Answer
JW
Jonah WaldenMay 01, 2024
Final Answer :
True
Explanation :
Absorption costing includes fixed manufacturing overhead as part of the cost of inventory, so changes in inventory levels can have a significant impact on reported income. This makes it more challenging for financial statement users to compare income from one year to the next when inventory levels fluctuate.
Learning Objectives
- Comprehend the variances between assorted costing techniques (absorption, variable) and how they influence financial disclosures.
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