When production is greater than sales
A)Net income under absorption costing will be greater than or less than net income under variable costing depending on the selling and administration costs.
B)Net income under absorption costing will be equal to net income under variable costing.
C)Net income under absorption costing will be less than net income under variable costing.
D)Net income under absorption costing will be greater than net income under variable costing.

Question

Quizplus · Accepted Answer

When production is greater than sales, some fixed manufacturing overhead costs are deferred in inventory under absorption costing, leading to higher net income compared to variable costing, where all fixed costs are expensed in the period incurred.

When Production Is Greater Than Sales