It is misleading to use the absorption costing income statement to predict the effect of changes in sales volume because ________.
A) variable production costs per unit do not change with small changes in sales volume
B) total fixed production costs do not change with small changes in sales volume
C) fixed production costs per unit do not change with small changes in sales volume
D) total variable production costs do not change with small changes in sales volume

Question

Quizplus · Accepted Answer

Absorption costing includes both variable and fixed production costs in the cost of goods sold, meaning that the total fixed production costs remain constant regardless of small changes in sales volume. This can mislead when predicting the effect of sales volume changes because it does not accurately reflect the variable nature of some costs with production levels.

It Is Misleading to Use the Absorption Costing Income Statement