If the production is greater than sales, then operating income under absorption costing is _________?
Correct answer: B. higher income
- A. zero dividends
- B. higher income
- C. negative income value
- D. lower income
Explanation
With production greater than sales, absorption costing defers part of fixed manufacturing overhead in ending inventory. It therefore reports higher operating income than variable costing.
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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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