Asked by Simran Nijjar on Jul 02, 2024
Verified
When the number of units produced exceeds the number of units sold,absorption costing defers some of the fixed costs incurred.
Absorption Costing
An accounting method that includes all manufacturing costs in the cost of a product.
Fixed Costs
Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance premiums.
- Comprehend the influence of production and sales quantity fluctuations on the reported earnings through the lens of both costing methodologies.
Verified Answer
MW
Maliyah Walls7 days ago
Final Answer :
True
Explanation :
This is because absorption costing allocates fixed overhead costs to units produced, which means that when units produced exceed units sold, some fixed costs are recorded in inventory rather than being expensed in the period they were incurred.
Learning Objectives
- Comprehend the influence of production and sales quantity fluctuations on the reported earnings through the lens of both costing methodologies.
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