Which of the following id NOT an example of the drawbacks of using absorption costing?
A)Operating profit solely reflects income from the sale of units and excludes the effects of manipulating production schedules
B)Management has the ability to manipulate operating profit via production schedules
C)Decreasing maintenance activities and increasing production result in increased operating profit
D)Manipulation of operating profit may ultimately increase the company's costs incurred over the long run

Question

Quizplus · Accepted Answer

Option A is not a drawback of using absorption costing. It is simply stating that operating profit only considers income from unit sales and does not account for the effects of production scheduling. The other options describe drawbacks of using absorption costing, such as the ability for management to manipulate operating profit via production schedules (B), the potential for increased operating profit through decreasing maintenance and increasing production (C), and the possibility that manipulation of operating profit may ultimately increase costs in the long run (D).

Which of the Following Id NOT an Example of the Drawbacks