Under absorption costing,managers can increase operating profit by holding more inventories at the end of the period.

Question

Quizplus · Accepted Answer

This statement is true. Under absorption costing, fixed manufacturing overhead costs are included in the cost of each unit produced. Therefore, if more units are produced and held in inventory at the end of the period, more fixed overhead costs will be allocated to the cost of goods sold, resulting in higher operating profit.

Under Absorption Costing,managers Can Increase Operating Profit by Holding More