When inventory levels remain constant, absorption and direct costing will result in the same operating income.
AASCB: Analytic

Question

Quizplus · Accepted Answer

Under both absorption and direct (variable) costing methods, if inventory levels remain constant (meaning the number of units produced equals the number of units sold), the fixed manufacturing overhead costs are fully allocated to cost of goods sold in the period incurred, resulting in the same operating income.

When Inventory Levels Remain Constant, Absorption and Direct Costing Will