1. Under absorption costing, the net operating income of a particular pe-
riod is dependent on both production and sales. For this reason, the
controller’s explanation was accurate. He should have pointed out, how-
ever, that the reduction in production resulted in a large amount of un-
derapplied overhead, which was added to cost of goods sold in the sec-
ond quarter. By producing fewer units than planned, the company was
not able to absorb all the fixed manufacturing overhead incurred during
the quarter into units of product. The result was that this unabsorbed
overhead ended up on the income statement as a charge against the
period, thereby sharply slashing income.
Bạn đang xem 1. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH07 VARIBLE COSSTING TOOL FOR MANAGEMENT