Register now or log in to join your professional community.
A. Overhead costs are treated in the same manner under both costing methods.
B. If finished goods inventory increases, absorption costing results in higher income.
C. Variable manufacturing costs are lower under variable costing.
D. Gross margins are the same under both costing methods.
B. If finished goods inventory increases, absorption costing results in higher income. The reason is that some of the fixed production overhead incurred during the period will be carried forward in cost finished goods inventory ( which reduces cost of sales) to be set against sales revenue in the following period instead of being written off in full against profit in the period.
Do you need help in adding the right keywords to your CV? Let our CV writing experts help you.