Under absorption costing, which of the following statements is not true? Over pr
ID: 2455841 • Letter: U
Question
Under absorption costing, which of the following statements is not true?
Over production and inventory buildup can occur because of how managers are evaluated and rewarded.
The fixed costs per unit decline as more units are produced.
Variable inventory costs are treated in the same manner as they are under variable costing.
Fixed inventory costs are treated in the same manner as they are under variable costing.
All manufacturing costs are assigned to products.
A.Over production and inventory buildup can occur because of how managers are evaluated and rewarded.
B.The fixed costs per unit decline as more units are produced.
C.Variable inventory costs are treated in the same manner as they are under variable costing.
D.Fixed inventory costs are treated in the same manner as they are under variable costing.
E.All manufacturing costs are assigned to products.
Explanation / Answer
Fixed inventory costs are treated in the same manner as they are under variable costing.
This statement is not true regarding Absorption costing.
Explanation:- Under absorption costing, the product cost consists of all variable as well as fixed manufacturing costs. But when variable costing is used, the fixed cost is treated as a period or capacity cost and therefore, not included in computing unit product cost.
D.)Fixed inventory costs are treated in the same manner as they are under variable costing.
This statement is not true regarding Absorption costing.
Explanation:- Under absorption costing, the product cost consists of all variable as well as fixed manufacturing costs. But when variable costing is used, the fixed cost is treated as a period or capacity cost and therefore, not included in computing unit product cost.
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