Income Effect Flashcards
1
Q
If Production = Sales
A
No change in inventory
Absorption costing Net Income = Variable costing net income
2
Q
If Production > Sales
A
Inventory Increases
Absorption costing Net Income > Variable costing net income
3
Q
If Production < Sales
A
Inventory Decrease
Absorption costing Net Income < Variable costing net income
4
Q
When Production is greater than sales why is Net income higher under absorption costing
A
fixed Manufacture OH is deferred in inventory as inventory increases
5
Q
When Production is less than sales why is Net income lower under absorption costing
A
fixed Manufacture OH is released from inventory as inventory decreases
