Absorption vs$,$ Variable Select whether the following characteristics are most often assoclated with absorption costing or varlable costing.

Required under generally accepted accounting principles $($GAAP$)$

often used for internal use in decislon making

Cost of goods manufactured includes only varlable manufacturing costs Used in reports prepared for external users

Flxed factory overhead costs are not part of cost of goods manufactured

Both fixed and varlable factory costs are Included in cost of goods sold and inventory

Absorption Statement

Absorption costing does not distinguish between varlable and fixed costs. All manufacturing costs are Included in the cost of goods sold.

Manufacturing Decisions analyzed in deciding whether absorption or varlable costing reporting would be more useful.

All costs are controllable in the long run by someone within a business. For a given level of management, costs may be controllable costs or noncontrollable costs. the total units manufactured changes, assume that total fixed costs, unit varlable costs, unit sales price, and the sales levels are the same. Complete questions $(1)-(4)$ that follow. If the answer is zero, enter $"0",$ Operating Income

$\backslash$table$[[\backslash$table$[[$Original Production$],[$Level$-$Absorption$]],\backslash$table$[[$Original Production$],[$Level$-$Variable$]],\backslash$table$[[$Additional $10,000],[$Units$-$Absorption$]],\backslash$table$[[$Additional $10,000],[$Units$-$Variable$]]],[$$$,$$$,$$$,]]$

What is the change in operating income from producing $10,000$ additional units under absorption costing?

$$

What is the change in operating income from producing $10,000$ additional units under variable costing?

$$

What would be your recommendation to the production manager?

b$.$ Produce the extra $10,000$ units. Operating income will be increased, and the production manager will recelve pralse for creating higher profits.

c$.$ Do not produce the extra $10,000$ units. Operating income does not change under absorption costing when the additional units are produced.

d$.$ Produce the extra $10,000$ units. It's alwrays a good Idea to have extra units on hand and keep the factory operating at capacity, even If all the units are not sold