Question

When sales are constant but the production level fluctuates?

Answer 1

When sales are constant, but the number of units produced fluctuates, net operating income determined by the absorption costing method will:

tend to fluctuate in the same direction as fluctuations in the number of units produced.

tend to remain constant.

tend to fluctuate in the opposite direction as fluctuations in the number of units produced.

fluctuate without any relation to the number of units produced.