When Viewed Over the Long Term, Cumulative Net Operating Income

question 124

True/False

When viewed over the long term, cumulative net operating income will be the same for variable and absorption costing if ending inventories exceed beginning inventories.

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Definitions:

Plantwide Overhead Rate

A single overhead absorption rate used throughout an entire factory or plant, calculated by dividing total overhead costs by total base units, often labor hours or machine hours.

Volume-Related Measures

Metrics that determine the effects of production or sales volume changes on costs and revenues.

Overhead Costs

Expenses not directly tied to the production of goods or services, like rent, utilities, and administrative costs.

Allocation Method

A procedure used in accounting or budgeting to distribute costs or revenues among various accounts or departments based on predetermined criteria.