When lean production methods are introduced,the difference in operating income calculated using the absorption and variable costing methods is reduced.

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Quizplus · Accepted Answer

Lean production methods emphasize reducing costs by eliminating waste and increasing efficiency, which can lead to a more consistent production volume and decreased inventory levels. This can reduce the difference between operating income calculated using the absorption and variable costing methods. Absorption costing allocates fixed manufacturing overhead costs to products, while variable costing only includes variable costs in product costs. When production volumes are inconsistent, absorption costing can result in larger differences in operating income compared to variable costing. However, when production is more consistent due to lean production methods, the difference in operating income calculated using the two methods can be reduced.

When Lean Production Methods Are Introduced,the Difference in Operating Income