If the first month of production is 6,000 units and sales are 5,500 units, absorption costing will yield a higher ending inventory value than will variable costing.

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Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead costs are allocated to each unit produced, increasing the per-unit cost and thus the ending inventory value. Variable costing only includes variable costs in product costs, so with fewer costs allocated to ending inventory, its value will be lower than under absorption costing.

If the First Month of Production Is 6,000 Units and Sales