Which of the following statements is true?
A)Absorption costing net income exceeds variable costing net income when units produced are greater than units sold.
B)Absorption costing net income exceeds variable costing net income when units produced are less than units sold.
C)Variable costing net income exceeds absorption costing net income when units produced exceed units sold.
D)Absorption costing net income exceeds variable costing net income when units produced and sold are equal.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead is included in the cost of inventory. When units produced exceed units sold, some fixed overhead costs are deferred in inventory, leading to higher net income compared to variable costing, where all fixed overhead is expensed in the period incurred.

Which of the Following Statements Is True