Question

The variable costing method prevents managers from increasing operating income simply by producing more units.

True

False

Answer 1

Answer : True

explanation

variable costing method prevents manager from increasing operating income simply by producing more units .

variable costing method do not consider the fixed manufacturing overhead cost as product cost

variable costing method does not have any fixed manufacturing overhead cost differed in ending inventory so it prevents the manager to increase operating profit by producing more .

whereas Absorption costing method allows manager to increase operating profit simply by producing more units .(fixed manufacturing overhead cost is differed in inventory, when units produced is more than units sold )