Which of the following statements is true?
A) Expenses are not usually separated into variable and fixed elements in externally reported income statements.
B) Even if there is no change in units sold, selling price, or cost structure, a company can increase its absorption costing net operating income from one year to the next just by producing more units.
C) When finished goods inventory decreases during a period, a manufacturing company's absorption costing net operating income for that period will usually be greater than its variable costing net operating income.
D) Both A and B above.

Question

Quizplus · Accepted Answer

Expenses are typically not separated into variable and fixed elements in externally reported income statements (A). Additionally, under absorption costing, producing more units can increase net operating income due to fixed manufacturing overhead being spread over more units (B).

Which of the Following Statements Is True