Profit will be the same under variable costing as under full absorption costing whenever:
A)the number of units produced is greater than the number of units sold.
B)the number of units produced is the same as the number of units sold.
C)the number of units produced is less than the number of units sold.
D)variable costing is chosen for external reporting purposes.

Question

Quizplus · Accepted Answer

Under variable costing, only variable manufacturing costs are included in the cost of goods sold. Fixed manufacturing costs are expensed as period costs. Under full absorption costing, both variable and fixed manufacturing costs are included in the cost of goods sold. Therefore, if the number of units produced is the same as the number of units sold, there will be no difference in the amount of fixed manufacturing costs that are expensed as period costs. As a result, profit will be the same under both variable and full absorption costing methods.

Profit Will Be the Same Under Variable Costing as Under