If the production is less than sales so, an operating income under absorption costing will be called ________?
Correct answer: D. lower income
- A. higher income
- B. zero dividends
- C. negative income value
- D. lower income
Explanation
When production is below sales, inventory falls and absorption costing releases previously deferred fixed manufacturing overhead, making operating income lower than under variable costing. The correct description is lower income.
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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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