When Sales Exceeds Production, Absorption Costing Shows a Higher Profit

question 50

True/False

When sales exceeds production, absorption costing shows a higher profit than variable costing because a portion of fixed costs are charged to inventories and thereby deferred to future periods.

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Definitions:

Maturity Date

The date on which a financial obligation must be repaid or settled in full.

Leap Years

Years that are divisible by 4 (except for years divisible by 100, unless they are also divisible by 400), having 366 days to keep the calendar year synchronized with the astronomical year.

Maturity Value

The total amount that will be received at the maturity date of an investment, including the principal and any accrued interest.

365-Day Year

A method used in finance calculations that assumes all years have 365 days for the purpose of simplifying interest calculations.