Analysts must be aware that with the use of absorption costing,as inventory absorbs more fixed costs,reported net income tends to

A) increase.
B) decrease.
C) remain the same.
D) become highly volatile.

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and equipment costs.

Net Income

The net income of a business following the deduction of all costs and taxes from its earnings.