A manufacturing company using full-absorption costing can increase net income by which of the following.
A)Increasing production and increasing ending inventory at the end of the year.
B)Decreasing the inventory
C)Writing ending inventory down to its fair value.
D)All of the above.

Question

Quizplus · Accepted Answer

By increasing production and increasing ending inventory at the end of the year, the manufacturing company can allocate more fixed manufacturing overhead costs to inventory, which will decrease the cost of goods sold and increase net income. Decreasing inventory or writing ending inventory down to its fair value will have the opposite effect, decreasing net income.

A Manufacturing Company Using Full-Absorption Costing Can Increase Net Income