If the fixed manufacturing cost expenses are under variable costing and are not expensed in absorption costing, it is resulting in _________?
Correct answer: A. production exceeds breakeven sales
- A. production exceeds breakeven sales
- B. breakeven sales exceeds production
- C. price exceeds cost
- D. cost exceeds price
Explanation
When production exceeds sales, absorption costing carries some fixed manufacturing overhead in ending inventory, while variable costing expenses it immediately. Therefore, the condition is that production exceeds sales and absorption-costing income is higher.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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