Cost Accounting (15th Edition)

Published by Prentice Hall
ISBN 10: 0133428702
ISBN 13: 978-0-13342-870-4

Chapter 9 - Inventory Costing and Capacity Analysis - Assignment Material - Questions - Page 358: 9-9

Answer

Absorption costing may incentivize managers to overproduce, as it lowers the per-unit fixed cost when production increases. This can lead to excess inventory and tie up resources, potentially conflicting with actual market demand and business efficiency.

Work Step by Step

Absorption costing may incentivize managers to overproduce, as it lowers the per-unit fixed cost when production increases. This can lead to excess inventory and tie up resources, potentially conflicting with actual market demand and business efficiency.
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