David Industries expects to sell 260,000 units in 2025. The manager is under pressure to increase operating income for the same period of time. He is trying to decide whether to produce the units required for demand, 260,000 or produce 300,000 units. David Industries would have a higher operating income if the manager decided to produce
A)260,000 units under variable costing.
B)260,000 units under absorption costing.
C)300,000 under variable costing.
D)300,000 under absorption costing.

Question

Quizplus · Accepted Answer

Under absorption costing, producing more units than needed can defer some fixed manufacturing costs to inventory, increasing operating income.

David Industries Expects to Sell 260,000 Units in 2025