Question

which of the following will not affect net income under absorption costing? A) a change in...

which of the following will not affect net income under absorption costing?
A) a change in the levels of inventory from the beginning to the end of the period
B) production levels not being the same as sales
C)a change in the fixed overhead application rate
D an increase in the amount of fixed cost incurred by the company
E) all of the above will affect net income
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Answer #1

E is the correct answer- all of the above will affect net income

Absorpotion costing -it is indicate that all of the manufacturing cost assigned to (or absorbed) by the units produced.

All will affect the absorpotion costing by directly or indirectly like if inventory level increase ,absorpotion costing will report a higher profit(vice-versa) than marginal costing.also absorption costing could result in increase in net income if company increase its production level(vice-versa).The fixed overhead assigned to a cost change as the volume changes, therefore the net income changes.

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