When comparing absorption costing with variable costing, which of the following statements is not true? A.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
When comparing absorption costing with variable costing, which of the following statements is not true?
A. Absorption costing enables managers to increase operating profits in the short run
by increasing inventories.
B. When sales volume is more than production volume, variable costing will result in
higher operating profit.
C. A manager who is evaluated based on variable costing operating profit would be
tempted to increase production at the end of a period in order to get a more favorable
review.
D. Under absorption costing, operating profit is a function of both sales volume and
production volume.
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