Asked by Surprise Bahati Mutunwa on May 25, 2024
Verified
When units produced exceed the units sold,income under absorption costing is higher than income under variable costing.
Absorption Costing
A financial calculation approach that encompasses both direct and indirect expenses related to producing a product.
Variable Costing
An accounting method that only includes variable production costs (costs that change with the level of output) in the cost of goods sold and treats fixed costs as period costs.
- Acquire knowledge on how fluctuations in production and sales affect income statements under each of the costing techniques.
Verified Answer
TR
Thirada RuancharoensinMay 25, 2024
Final Answer :
True
Explanation :
In absorption costing, fixed manufacturing costs are included in the cost of goods sold, therefore when units produced exceed the units sold, the fixed manufacturing costs are spread over a larger number of units, resulting in a higher income compared to variable costing where only variable costs are included in the cost of goods sold.
Learning Objectives
- Acquire knowledge on how fluctuations in production and sales affect income statements under each of the costing techniques.
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