Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing?
A)units produced equal units sold.
B)units produced are greater than units sold.
C)units produced are less than units sold.
D)income determined with absorption costing will always equal income determined with direct costing.

Question

Quizplus · Accepted Answer

When units produced are greater than units sold, some fixed manufacturing overhead costs are deferred in inventory under absorption costing, leading to higher income compared to direct costing, where all fixed costs are expensed in the period incurred.

Which of the Following Will Cause Income Determined with Absorption