Asked by Katherine Fortune on Jun 18, 2024
Verified
When units produced equal units sold,reported income is identical under absorption costing and variable costing.
Absorption Costing
An accounting method that includes all direct and indirect manufacturing costs in the cost of a product.
Variable Costing
A costing method that includes only variable production costs in the cost of goods sold and uses fixed manufacturing overhead as a period cost.
- Comprehend the impact of production volumes on earnings using different costing approaches.
Verified Answer
AR
aneesa rahimJun 19, 2024
Final Answer :
True
Explanation :
This is because there is no difference between absorption costing and variable costing when units produced equal units sold, as there are no beginning or ending inventory balances to be accounted for. Therefore, all costs incurred in producing the units (direct materials, direct labor, and variable and fixed overhead) are expensed as cost of goods sold, resulting in identical reported income under both costing methods.
Learning Objectives
- Comprehend the impact of production volumes on earnings using different costing approaches.
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