Under the absorption costing method, a company can increase profits simply by increasing the number of units produced.

Question

Quizplus · Accepted Answer

Under the absorption costing method, fixed production costs are included in the cost of each unit produced. Therefore, as more units are produced, the fixed costs are spread out over a larger number of units, resulting in a lower cost per unit and potentially higher profits. However, it's important to note that increasing production may also result in higher variable costs and selling expenses, which could offset the benefits of spreading fixed costs over more units.

Under the Absorption Costing Method, a Company Can Increase Profits