Which of the following is TRUE concerning operating income calculated under variable costing as compared to absorption costing?
A)Operating income is lower under variable costing when production exceeds sales.
B)Operating income is higher under variable costing when production exceeds sales.
C)Operating income is lower under variable costing when sales exceeds production only if there is a production-volume variance.
D)operating income is higher under variable costing when production exceeds sales only if there is a production-volume variance.
E)The relationship between production and sales has no bearing on the differences in operating income between the two methods.

Question

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing costs are treated as period costs and are not included in inventory values. Therefore, when production exceeds sales, some fixed costs will be expensed in the current period and operating income will be lower compared to absorption costing.

Which of the Following Is TRUE Concerning Operating Income Calculated