Which inventory costing method allows net income to be manipulated by changing production levels?

Question

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs in the cost of goods sold and allows a company to manipulate net income by changing production levels. This is because fixed manufacturing overhead costs are included in the cost of goods sold and can be allocated among more units if production levels increase, reducing the cost per unit and increasing net income. The other costing methods do not include all manufacturing costs in the cost of goods sold and therefore do not allow for the same level of manipulation.

Which Inventory Costing Method Allows Net Income to Be Manipulated