Question

Absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will Blank______ in total as the number of units produced increases. Multiple choice question. increase remain the same decrease

Answer 1

Absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will A)increase in total as the number of units produced increases.

Absorption costing includes constant overhead as part of the inventory value, and it's far expensed as the price of products offered whilst stock is offered.

in addition, the usage of absorption costing generates a scenario wherein really manufacturing more objects that move unsold with the aid of the quit of the duration will boom internet income. because constant prices are spread throughout all devices synthetic, the unit constant fee will decrease as more gadgets are produced.

the primary benefit of absorption costing is that it complies with GAAP and extra appropriately tracks income than variable costing. Absorption costing takes under consideration all product prices, unlike variable costing, which simplest considers variable charges.

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