Examlex
Explain how a manufacturing company can manipulate earnings by including non-production costs in inventories. What does an auditor or financial statement user do to detect this type of manipulation?
Absorption Costing
A method in accounting that integrates every manufacturing expense – direct materials, labor, and all overheads (variable and fixed) – into the product’s price.
Net Operating Income
A company's total profit from operational activities, excluding expenses related to interest and taxes.
Period Cost
Expenses that are not directly tied to production activities and are expensed in the period in which they occur.
Contribution Margin
The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and contribute to profit.
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