Which of the Following Statements Is Not True of Absorption

question 17

Multiple Choice

Which of the following statements is not true of absorption costing?

• A) When sales equal production, absorption costing yields the same profit as variable costing.
• B) When production exceeds sales, absorption costing shows a lower profit than variable costing does.
• C) When sales exceed production, absorption costing shows a lower profit than variable costing does.
• D) Absorption costing allocated both fixed and variable overheads to product cost.

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Definitions:

Injunction

A court order requiring an individual to do or cease doing a specific action.

Reformation

A legal process to correct or modify a written agreement or document that inaccurately reflects the parties' intentions due to error or fraud.

Punitive Damages

Financial compensation awarded to a plaintiff to punish the defendant for especially harmful behavior, beyond simple compensation.

American Rule

A legal principle that states each party involved in a lawsuit covers their own attorney fees, regardless of the outcome of the case.