Under absorption costing when inventory increases in a year:
A)There are more fixed costs charged to income.
B)There are less fixed costs charged to income.
C)Fixed costs in inventory remain the same regardless of inventory changes.
D)Fixed costs in inventory are reduced.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing costs are included in the cost of inventory. When inventory increases, more fixed costs are capitalized in inventory, resulting in less fixed costs being charged to income as expenses.

Under Absorption Costing When Inventory Increases in a Year