Under the Absorption Costing Method, a Company Can Increase Profits

question 124

True/False

Under the absorption costing method, a company can increase profits by increasing production rather than by increasing sales.

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Definitions:

Square Footage

The measurement of area, especially used in reference to the size of a building or room, calculated in square feet.

Contribution Margin

The amount remaining from sales revenue after all variable expenses have been deducted.

Contribution Margin

Contribution Margin is the selling price per unit minus the variable cost per unit, indicating how much of a product's sales contribute towards fixed expenses and profit.

Net Income

The profit of a company after all expenses and taxes have been subtracted from total revenue; a key indicator of financial health.