A Reason Why Absorption Costing Income Statements Are Sometimes Difficult

question 128

Multiple Choice

A reason why absorption costing income statements are sometimes difficult to interpret is that:

• A) they omit variable expenses entirely in computing net operating income.
• B) they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories.
• C) they include all fixed manufacturing overhead on the income statement each year as a period cost.
• D) they ignore inventory levels in determining cost of goods sold.

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