For a period during which the quantity of inventory at the end is smaller than that at the beginning, operating income reported under variable costing will be smaller than operating income reported under absorption costing.

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Under variable costing, only variable manufacturing costs are included in product costs, whereas under absorption costing, both fixed and variable manufacturing costs are included. If inventory decreases, the fixed manufacturing costs released from inventory under absorption costing will increase the cost of goods sold and decrease operating income compared to variable costing, where these costs have already been expensed.

For a Period During Which the Quantity of Inventory at the End