If a Company Uses Standard Absorption Costing, How Could a Business

question 138

Multiple Choice

If a company uses standard absorption costing, how could a business manager exploit that accounting method in order to boost book income without violating the rules of GAAP?

• A) By adopting just-in-time inventory management, the manager could reduce the costs of financing and storing inventory, which would in turn, help boost book income.
• B) By coding administrative costs to inventory, the manager could report lower total expenses and thus report higher income.
• C) By reducing inventory levels, the manager could show higher sales revenues, and thus report higher book income.
• D) By building up inventory levels, fixed manufacturing costs could be "stored up" in inventory, the cost of goods sold would be lower, and book income would be higher.

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Definitions:

Co-Regulation

A process where individuals interact in a way that supports emotional and behavioral regulation, often seen in caregiver-child dynamics.

Parental Cooperation

The joint effort and collaboration between parents in the upbringing of their children, emphasizing shared responsibilities and decision-making.

Child's Transition

The process by which children move from one stage of development or activity to another, involving changes in roles, responsibilities, and expectations.

Serotonin

A neurotransmitter in the brain that plays a key role in stabilizing mood, feelings of well-being, and happiness, also influencing sleep, digestion, and other bodily functions.