If fixed overhead cost variances are always written off to Cost of Goods Sold, operating income can be manipulated for either financial reporting or income tax purposes.

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Since fixed overhead cost variances are written off to Cost of Goods Sold, adjusting the amount of fixed overhead costs can manipulate the reported operating income for financial reporting or income tax purposes. This is because these variances do not directly affect the production or sale of goods but rather relate to overhead expenses that may be controllable by management.

If Fixed Overhead Cost Variances Are Always Written Off to Cost