When the number of units produced is greater than the number of units sold, variable costing yields higher income than full costing.

Question

Quizplus · Accepted Answer

When the number of units produced is greater than the number of units sold, variable costing yields lower income than full costing. This is because under variable costing, only variable manufacturing costs are treated as product costs and fixed manufacturing costs are treated as period costs. As a result, when there is excess production, more fixed costs are expensed as period costs under variable costing, reducing net income compared to full costing where fixed manufacturing costs are included in inventory and expensed only when units are sold.

When the Number of Units Produced Is Greater Than the Number