Under absorption costing when production equals sales in a year,
A)inventory values and cost of goods sold are higher than under variable costing.
B)inventory values and cost of goods sold are lower than under variable costing.
C)inventory values and cost of goods sold are the same as under variable costing.
D)inventory values are higher and cost of goods sold is lower than under variable costing.

Question

Quizplus · Accepted Answer

Under absorption costing, when production equals sales, inventory levels do not change, resulting in the same inventory values and cost of goods sold as under variable costing. This is because all costs (fixed and variable) are allocated to the units produced and sold in the same period.

Under Absorption Costing When Production Equals Sales in a Year