Assuming no beginning inventory, if production is greater than sales, ending inventory is higher under absorption costing than under variable costing.

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Quizplus · Accepted Answer

Under absorption costing, both fixed and variable manufacturing costs are included in the cost of inventory, whereas under variable costing, only variable manufacturing costs are included. Therefore, if production exceeds sales, the ending inventory will be higher under absorption costing because it includes the fixed manufacturing costs that have not yet been expensed as part of the cost of goods sold.

Assuming No Beginning Inventory, If Production Is Greater Than Sales