Asked by Gursave Singh on Jun 22, 2024
Verified
Assuming fixed costs remain constant,and a company produces more units than it sells,then income under absorption costing is less than income under variable costing.
Fixed Costs
Fixed expenses that are unaffected by changes in production or sales volume, encompassing rent, salaries, and insurance.
Absorption Costing
A method of accounting for all the costs associated with manufacturing a product, including all direct costs and fixed and variable overhead expenses.
Variable Costing
An accounting approach where only variable manufacturing costs are included in product costs, excluding fixed manufacturing overhead.
- Understand how production levels affect income under both costing methods.
Verified Answer
Learning Objectives
- Understand how production levels affect income under both costing methods.
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