Absorption costing
A)is not allowed under GAAP.
B)is not allowed for external reporting purposes.
C)may lead to poor business decisions
D)highlights differences between variable and fixed costs.
E)optimizes business decisions.

Question

Quizplus · Accepted Answer

Absorption costing may lead to poor business decisions due to the fact that fixed costs are allocated to each unit produced, which can result in higher per-unit costs and potentially lead to incorrect pricing decisions or overproduction. This can distort the true cost behavior of production and impact decision-making.

Absorption Costing