During periods in which inventory levels increase, sales revenue will be larger when using full costing than if variable costing is used.

Question

Quizplus · Accepted Answer

When inventory levels increase, full costing will assign some fixed manufacturing overhead to the inventory cost, which will be expensed when the inventory is sold. This will lead to higher cost of goods sold and lower net income under full costing compared to variable costing.

During Periods in Which Inventory Levels Increase, Sales Revenue Will