Under absorption costing, a change in the level of production will affect the amount of fixed costs reported on the income statement for the period.

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Under absorption costing, fixed manufacturing overhead costs are allocated to each unit produced. Therefore, when production levels change, the total amount of fixed costs allocated to units and reported on the income statement as part of the cost of goods sold will also change, even though the total fixed costs themselves do not change.

Under Absorption Costing, a Change in the Level of Production