Absorption costing and other methods make it possible to manipulate operating income, accounting homework help

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Business Finance

Description

Absorption costing and other methods make it possible to manipulate operating income raising some serious ethical concerns. Construct an argument either for or against the use of absorption costing (or similar methods) in terms of its ethical ramifications.

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Explanation & Answer

Attached.

Running head: ABSORPTION COSTING

1

Absorption Costing
Institution Affiliation
Date

ABSORPTION COSTING

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Operating Income is the earning before addition of interest and deduction of taxes. There
are various methods of evaluating and calculating the operating income of a company. Some of
these methods may bring out the exact figures but some may manipulate the figures. Absorption
Costing is the process by which the cost of products is inclusive of the direct materials used in
production and the direct labor involved in producing a pro...


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