When Absorption Costing Is Used

question 7

Multiple Choice

When absorption costing is used

• A)for external reporting, variable costing can still be used for internal reporting purposes.
• B)management may be tempted to overproduce in a given period in order to decrease net income.
• C)it facilitates cost-volume-profit analysis.
• D)and production exceeds sales, absorption costing reports a lower net income than variable costing.

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Definitions:

Model Business Corporation Act

A standardized set of laws designed to regulate business corporations, serving as a guide for state legislatures in drafting their corporate statutes.

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Corporation Law

The body of laws, rules, and regulations that govern the formation, operation, and dissolution of corporations.

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An investor in a partnership who has limited liability to the extent of their investment in the partnership and does not participate in day-to-day management.