For the period above, one would expect the net operating income under absorption costing to be:
A)higher than the net operating income under variable costing.
B)lower than the net operating income under variable costing.
C)the same as the net operating income under variable costing.
D)The relation between absorption costing net operating income and variable costing net operating income cannot be determineD.When production exceeds sales, net operating income under absorption costing will always be higher than under variable costing.A portion of fixed manufacturing cost will be deferred in ending inventory rather than being included in the income statement.

Question

Quizplus · Accepted Answer

When production exceeds sales, absorption costing defers some fixed manufacturing costs in inventory, resulting in higher net operating income compared to variable costing.

For the Period Above, One Would Expect the Net Operating