Phantom Profits Result When Absorption Costing Is Used and Production

question 55

True/False

Phantom profits result when absorption costing is used and production exceeds sales.

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Definitions:

Productivity

The measure of the efficiency of production, often defined as the ratio of output produced to inputs used.

Net Exports

The value of a country's total exports minus its total imports, reflecting the balance of trade.

Capital Deepening

An increase in the amount of capital per worker; one source of rising labor productivity.

Capital Per Worker

A ratio measuring the amount of capital available to each worker, often used as an indicator of labor productivity.