Consider the following statements regarding absorption costing and variable costing.i.Profit reported under absorption costing for a year will likely differ from that reported under variable costing because production and sales differ
Ii)Total profit when added together over a ten-year period will be approximately equal under absorption costing and variable costing because production and sales will be approximately the same.
Iii)Total profit when added together over a ten-year period will be significantly different under absorption and variable costing because fixed costs will generally increase significantly over that long.Which statement/s is/are true?
A) i
B) i and ii
C) i and iii
D) ii

Question

Quizplus · Accepted Answer

Statement i is true because absorption costing includes fixed manufacturing overhead in product costs, affecting profit when production and sales differ. Statement ii is true because over a long period, total production and sales tend to equalize, making total profits similar under both costing methods. Statement iii is false because fixed costs do not cause significant differences in total profit over a long period when production equals sales.

Consider the Following Statements Regarding Absorption Costing and Variable Costing