The difference between the reported income under absorption and variable costing is attributable to the difference in the
A)income statement formats.
B)treatment of fixed manufacturing overhead.
C)treatment of variable manufacturing overhead.
D)treatment of variable selling,general,and administrative expenses.

Question

Quizplus · Accepted Answer

The difference between absorption and variable costing is mainly due to the treatment of fixed manufacturing overhead costs. Absorption costing includes fixed overhead costs as part of the cost of goods sold while variable costing treats fixed overhead as a period cost and excludes it from the cost of goods sold. Therefore, the reported income under absorption costing will be higher when production exceeds sales, while variable costing will report a higher income when sales exceed production. The other options listed do not contribute to the difference in reported income between these two costing methods.

The Difference Between the Reported Income Under Absorption and Variable