For an accounting period during which the quantity of inventory at the end is smaller than the quantity at the beginning, operating income reported under variable costing will be larger than operating income reported under absorption costing.

Question

Quizplus · Accepted Answer

When ending inventory decreases, fixed manufacturing costs deferred in inventory under absorption costing are released, reducing operating income compared to variable costing, which expenses all fixed costs in the period incurred.

For an Accounting Period During Which the Quantity of Inventory