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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Definitions:

Gymnosperms

A group of seed-producing plants that includes conifers, cycads, Ginkgo, and gnetophytes, characterized by seeds not enclosed in an ovary.

Diploid

Referring to cells or organisms having two sets of chromosomes, one set inherited from each parent.

Sporophyte Generation

The diploid phase in the life cycle of plants and algae that produces spores through meiotic division, alternating with the gametophyte generation.

Gametophyte Generation

The sexual phase in the life cycle of plants and algae that produces gametes.