Absorption Costing Is Inconsistent with CVP Analysis

question 64

True/False

Absorption costing is inconsistent with CVP analysis.

---

Definitions:

Long-run Total Costs

The total costs incurred by a firm when all factors of production are variable, emphasizing the period where no costs are fixed.

Average-fixed-cost Curve

A curve that shows the relationship between the average fixed cost of producing a good and the quantity of the good produced, typically declining as production increases.

Marginal Product

The increase in output that results from employing one more unit of a particular input, holding all other inputs constant.

Explicit Costs

Direct, out-of-pocket expenses paid by firms for inputs to production, such as wages, rent, and materials, as opposed to implicit costs which are not directly paid out in cash.