A manager can increase operating income by deferring maintenance beyond the current accounting period when absorption costing is used.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing costs are allocated to units of production. If maintenance is deferred, the fixed costs associated with maintenance will not be expensed in the current period, resulting in a higher operating income. However, this practice may lead to increased costs and decreased efficiency in the long run.

A Manager Can Increase Operating Income by Deferring Maintenance Beyond