This is a true statement. When sales volume is greater than production volume, units are sold from inventory which causes the fixed cost attached to those units to reach the income statement as cost of sales under absorption costing. As a result, total fixed cost expensed would consist of all of the current year's fixed cost plus a portion of previous years' fixed costs. Under variable costing, all fixed costs would be expensed in the year incurred, so the fixed cost expensed for the current year would be only the current year's fixed cost.
This is a true statement. Under absorption costing, an increase in inventory will keep more of the fixed factory overhead on the balance sheet and off the income statement resulting in decreased expenses and higher operating profit. A decrease in inventory will cause some of the fixed factory overhead that is on the balance sheet to be expensed, resulting in an increase in expenses and lower operating profit.
Under variable costing, the fixed factory overheads are expensed in the period incurred, so an increase in production would not impact the income from the period, nor the manager's review.
This is a true statement because an increase in inventory will keep more of the fixed factory overhead on the balance sheet and off the income statement.
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