In absorption costing, an effect on cost volume profit relationship is driven by __________?
Correct answer: C. all of above
- A. unit level of production
- B. unit level of sales
- C. all of above
- D. chosen denominator level
Explanation
Under absorption costing, operating income can be affected by production volume, sales volume, and the denominator level used to assign fixed manufacturing overhead. Therefore, all three factors are relevant.
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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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