the bottom line is, absorption costing can create an illusion of efficiency by spreading the...
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Accounting
the bottom line is, absorption costing can create an illusion of efficiency by spreading the fixed manufacturing overhead cost over a large volume of output.
The question then is: If absorption costing method may produce such "misleading" results on the income statement, why do companies even use this method...why are they allowed? Why doesn't anybody stop them? And, can anybody present an argument in favor of variable costing that would eliminate the issue caused by the misuse of absorption costing?
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