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

Question

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing overhead is expensed in the period incurred, not included in the cost of inventory. Therefore, if beginning and ending inventories are equal, the total fixed manufacturing overhead cost expensed under both methods would be the same, making the difference in operating income due to the treatment of variable versus fixed costs, not inventory levels.

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